- EUR/USD is on track to end April in the red.
- Eurozone GDP is expected to show biggest contraction since 2008-09.
- ECB is likely to keep policy unchanged and retain dovish bias.
EUR/USD is likely to end April on a negative note, as the German data is expected to show an uptick in the jobless rate, and the European Central Bank (ECB) has little or no room to sound hawkish.
At press time, the pair is trading around 1.0860, down over 1% from the monthly opening rate of 1.1039. The shared currency has been offered this month on the inability of the European nations to agree to a comprehensive coronavirus stimulus package and the resulting fears of a prolonged economic downturn. The occasional haven demand for the US dollar also added to the bearish tone around EUR/USD.
German data and ECB eyed
The German consumer spending, as represented by Retail Sales, is forecasted to have dropped by 7.3% month-on-month in March. Meanwhile, the labor market data is expected to show the jobless rate ticked higher to 5.2% in April from 5% in March.
Retail Sales may beat expectations and could have registered growth in March due to panic buying ahead of coronavirus-led lockdown. As a result, the single currency may not respond to an above-forecast reading. However, if the jobless rate prints below estimates, the shared currency will likely catch a bid.
The Eurozone data, due at 09:00 GMT, is expected to show a contract by its largest amount since the great recession. “Economists are looking for GDP to fall by -3.7% but for the Eurozone, the actual number could be much worse,” noted BK Asset Management’s Kathy Lien.
The European Central Bank (ECB) is likely to leave its policy unchanged and express willingness to provide more monetary stimulus if required. TD Securities Analysts think the EUR will likely react more to the ECB’s influence on sentiment than traditional monetary policy signals.
“More from the Governing Council is likely to be seen as better for the currency, for now,” analysts said.
Meanwhile, BK Asset Management’s Lien said, “they are looking to increase asset purchases but could delay the decision for another month. Regardless like the Fed, ECB President Lagarde will be very dovish.”