(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS
The euro is down for the second day against the US dollar by 0.7% and remains near the 1.04230 level.
The euro's losses today come as negative signs about the German economic situation are renewed, with confidence falling more than expected, according to the GfK Consumer Climate survey.
The headline reading of the index was -22.4 in January, which was lower than the expected -20.5. This came as economic and income expectations declined, in addition to a decline in the willingness to buy, in conjunction with a rise in the willingness to save. The recent return to high inflation in Germany and concerns about job security amid news of factory closures have affected consumer sentiment, according to the GfK report. Rolf Bürkl, consumer expert at the Nuremberg Institute for Market Decisions, also said that the few hopes for a recovery seen in December have faded.
This survey is part of a series of data and surveys that have heightened concerns about the health of the eurozone and its major economies. This month, we have seen negative signals about business and investor sentiment in the ZEW and Sentix surveys, compared to some positivity in the purchasing managers' surveys.
All this comes amid political uncertainty, especially in Germany, and anticipation of the tariffs that Donald Trump will impose on imports to the United States, in addition to the absence of a near horizon for a settlement to the war in Ukraine.
As for the bond market, what may limit the euro's losses in the short term is the tendency of US Treasury yields to decline, as well as the gap with their counterparts in German government bunds. The tendency of US investors to reduce risky assets from stocks in their portfolios has contributed to pushing bond yields lower.
Meanwhile, the focus now turns to the outcomes of today's Federal Reserve meeting. The central bank is widely expected to keep interest rates unchanged, according to the CME FedWatch Tool. However, the focus will be on Fed Chairman Jerome Powell's speech following the announcement of the decision. Maintaining his tightening tone on keeping rates high could keep the euro on its downward trend. However, if Powell eases his concerns about the upside risks to inflation, with Donald Trump more open to negotiating tariffs, this could give the euro some respite to recover.
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