Euro Weakens As German Business Sentiment Worsens, Virus Concerns Grow

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The euro came under pressure against its major rivals in the European session on Monday, as a resurgence in coronavirus cases in Europe fueled concerns about the global economic recovery.

Italy and Spain imposed fresh restrictions to control the second-wave of infections throughout Europe.

Spain has announced a national state of emergency and imposed a curfew from 11 p.m. to 6 a.m.

France registered a record daily rise in infections, while Italy announced new restrictions over the weekend, which shut down gyms, pools and movie theaters.

The currency was further weighed by a drop in German Ifo business sentiment index for October.

Survey data from Ifo Institute showed that German business sentiment weakened in October.

The business climate index fell to 92.7 in October from revised 93.2 in September. The reading was below economists’ forecast of 93.0.

The European Central Bank is due to meet later this week. Rising virus cases fueled hopes that the ECB is likely to increase the Pandemic Emergency Purchase Programme in December.

The euro edged down to 1.1803 against the greenback, after rising to 1.1859 at 6:00 pm ET. On the downside, 1.15 is possibly seen as its next support level.

The euro pulled back from an early high of 124.20 against the yen and was trading at 123.78. The euro is likely to test support around the 120.00 level, if it drops further.

Data from Bank of Japan showed that Japan’s services producer price inflation accelerated to a six-month high in September.

The services Producer Price index advanced 1.3 percent year-on-year in September, following a 1.1 percent rise in August. This was the fastest increase since March when prices gained 1.4 percent.

Reversing from a high of 0.9106 set at 3:15 am ET, the euro dropped to 0.9041 against the pound. Next key support for the euro is seen around the 0.88 level.

The euro depreciated to a 1-week low of 1.6534 against the aussie and near a 2-week low of 1.7635 against the kiwi, down from its prior highs of 1.6660 and 1.7740, respectively. The euro is poised to find support around 1.60 against the aussie and 1.70 against the kiwi.

The euro was lower against the loonie, at 1.5558. This followed a 2-day high of 1.5600 seen at 3:45 am ET. The next possible support for the euro is seen around the 1.50 level.

In contrast, the euro was steady against the franc, with the pair trading at 1.0711. This followed a pullback from its Asian session’s high of 1.0728. The pair had finished last week’s deals at 1.0715.

Looking ahead, U.S. new home sales for September are scheduled for release in the New York session.

The material has been provided by InstaForex Company – www.instaforex.com

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