The EUR/USD is dropping from two-week highs amidst strength in the U.S Dollar. After clocking highs of $1.098 in the Tuesday trading session, the currency pair has tumbled and now finds itself trading near a crucial support level at $1.085.
Dollar Strength Impact
The dollar strength comes at the backdrop of a flurry of negative news that continue to raise concerns about the health of the biggest economy in the world. Retail sales dropping 8.7% marked the biggest drop since 1992, all but affirming the damage that the Coronavirus pandemic continues to cause on the U.S economy.
Consumer spending, which accounts for more than two-thirds of the U.S economy continues to take a hit, amidst lockdowns imposed by states. The manufacturing sector is another key driver of the U.S economy that has also taken a hit. Factory shutdowns across the country continue to take a toll on the economy, with the Empire State manufacturing index plummeting to new all-time lows.
Amidst concerns about the health of the U.S economy, the U.S dollar has continued to strengthen. This is in part because investors are betting on the U.S Dollar as a safe haven. The EUR/USD pair has consequently turned bearish on the dollar strength as the risk-off mood continues to grip the market.
The Euro has also continued to weaken against the dollar, and other majors as the markets await a new wave of easing of coronavirus restrictions by the European Union Commission Chief, Ursula von der Leyen. Euro weakness can also be attributed to uncertainty on the easing restrictions that the German Chancellor is planning ahead of a meeting with Germany’s 16 state premiers.
Euro weakness could persist on the release of Eurozone Industrial production data. Weak data compared to estimates could see the EUR/USD pair continue to edge lower. Traders will also be paying attention to the U.S jobless data. With expectations high of another huge increase in the number of Americans claiming unemployment benefits, the U.S dollar strength could persist given its safe-haven attributes.