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Forex News: Euro Drops Amid Risk Aversion

Euro Drops Amid Risk Aversion

06/09/2020 - 06:47:00 (RTTNews)

(RTTNews) - The euro declined against its major counterparts in the European session on Tuesday, as European stocks fell amid growth worries after the World Bank warned the global economy will shrink by 5.2 percent this year, representing the deepest recession since the Second World War.

Sentiment faded after April trade data from Germany, the region's economic engine.

Data from Destatis showed that German exports declined at the sharpest pace since records began in 1950 due to the lockdown measures taken by economies across the globe.

Exports decreased 31.1 percent year-on-year in April following a 7.7 percent drop in March. This was the biggest fall since the introduction of foreign trade statistics in 1950.

At the same time, imports decreased 21.6 percent annually after falling 4.4 percent a month ago. The last time imports went down that much was in July 2009 during the global financial crisis.

Consequently, the trade surplus declined to EUR 3.5 billion, the lowest since December 2000, from EUR 17.8 billion in the same period last year.

In economic releases, data from Eurostat showed that the euro area economy contracted less-than-expected in the first quarter.

The bloc's quarterly reading came in at -3.6 percent, versus -3.8 percent reported in the preliminary reading.

The euro dropped to 5-day lows of 1.1241 against the greenback and 1.0746 against the franc, after rising to 1.1315 and 1.0829, respectively in early deals. The euro is seen finding support around 1.09 against the greenback and 1.06 against the franc.

The euro weakened to a 6-day low of 121.33 against the yen, from a high of 122.60 seen at 6:55 pm ET. On the downside, 118.00 is possibly seen as the next support level for the euro.

In contrast, the euro climbed to 4-day highs of 1.5185 against the loonie, 1.6301 against the aussie and 1.7385 against the kiwi, from its early low of 1.5103, 5-month low of 1.6065 and a 2-1/2-month low of 1.7190, respectively. The euro is likely to find resistance around 1.55 against the loonie, 1.65 against the aussie and 1.80 against the kiwi. The euro recovered to 0.8914 against the pound, from near a 4-week low of 0.8864 set at 2:45 am ET. If the euro rises further, it may challenge resistance around the 1.55 level.

Looking ahead, U.S. wholesale inventories for April are due in the New York session.

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