The total weakening of the European currency is starting to seriously worry the market. It looks like a protracted disease that the euro cannot get rid of. Experts fear that with a prolonged fall in the euro, it will “slip through” all the chances for recovery that the market gives from time to time.
Currently, the single European currency continues to stomp within annual lows, and in relation to the US currency, it has fallen to three-year lows. An extremely weak data on the Eurozone business sentiment index from ZEW became an additional nail in the coffin for the euro. Recall that February of this year, the ZEW economic sentiment indicator for Germany rapidly fell to 8.7 points from 26.7 points recorded in January. Analysts also noted a deterioration in the assessment of the economic situation. By the beginning of this year, the German economy had disappointed the market. A negative reaction to an outbreak of coronavirus infection added fuel to the fire, due to the fact that it can drastically slow down global trade, which will put additional pressure on the euro.
According to reports on the eurozone economy, the current situation is not encouraging either, as the Eurozone ZEW index has fallen from 25.6 points to 10.4 points. Experts believe that such a suspended state will continue until Friday, February 21. Tomorrow, the publication of the PMI Markit indices is expected as well as a report on consumer inflation for January 2020, and before that, the European currency has no reason to turn up.
Disappointing information from ZEW accelerated the sale of the euro. During this period, the bears intensified, but even they were frightened by the gloomy prospects of the single currency. Many of them are afraid to bet against the euro in the spot market. Many traders and investors have to develop additional strategies to win.
Currently, quotes of the European currency are in the range formed after the elections in France in 2017. Analysts are sure that this indicates a stop in the fall of the euro, as long as the single currency does not miss its chance. At the moment, the euro is located near the trend line, recorded at the end of 2000. According to experts, if the discrepancy between the US and Europe does not increase, the euro will remain there for a long time.
Macroeconomic information from the United States also finished off the already wounded European currency. Under the yoke of positive data from the United States, particularly after the active growth of the Empire State Manufacturing Index to 12.9 points from the previous 4.8 points, the EUR / USD pair sank to 1.0800. This was the round level on Wednesday, February 19th.
Note that on Wednesday, the bulls on the euro were guided by a minimum of 1.0788 that was achieved earlier. On the following day, the pair re-entered this range, again rushing to the bottom.
According to experts, European and American businesses are equally vulnerable to the problems of global trade and the negative consequences of the coronavirus epidemic. In response to such threats, Washington and the European Union give the same reaction by easing monetary policy. However, in the event of force majeure, business in the United States is recovering faster than in Europe, where weak statistics have long drawn a train of serious problems. The recovery of the European economy is becoming protracted, which leaves an imprint of the “disease” on the euro.
The current imbalance is noticeably reflected in the dynamics of the EUR / USD pair, provoking its steady decline. After not-so-good statistics, markets are wary of introducing new monetary incentives for the European economy, while the US can do it without them. Experts added that the weakening of the euro in relation to the dollar may continue in the coming months, and only a reversal of fundamental indicators is capable of stopping it.
Analysts find it difficult to answer when will the single European currency manages to “pull themselves together” and begin to rise. The constant failures of the euro knock the market out of the rut, to such an extent that even the bears in the euro are beginning to fear negative consequences. Nevertheless, experts are counting on the restoration of the single currency in the long term, starting from the second half of 2020.