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EUR/USD: euro falls to new one-month low as risk appetite wanes

The euro fell to a new one-month low of $1.073 in early European trade, following a renewed round of strength in the dollar and the yen.

EUR/USD stays under pressure following poor economic data

EUR/USD failed to rebound in Asian trade to end the week, after falling through recent support levels in Europe on Thursday.

After straining against downside resistance to hold above $1.08, the euro lost ground in the wake of PMI data prints for the bloc’s two largest economies – Germany and France – revealed the scale of the impact from the Covid-19 pandemic.

Since falling below $1.08, EUR/USD continued to edge lower in Asian markets in what marked another cautious session to end the week.

And as traders in the UK and Europe kicked things off on Friday, there was a renewed round of risk-off sentiment that saw the euro fall below its daily support level of $1.077.

By 8am (UK time), EUR/USD was trading at just $1.073, marking a fresh one-month low.

The move was accompanied by broader strength in the US dollar and the safe-haven Japanese yen, as the antipodean currencies (AUD and NZD) also lost ground.

Stock market futures are also in the red, with both the FTSE 100 and the STOXX Europe 600 pointing around one per cent lower ahead of Friday trade.

Looking at the day ahead, German IFO business expectations could impact EUR/USD following yesterday’s sharp decline in PMI activity.

EU leaders indicate willingness to cooperate

EUR/USD was unable to find any momentum on Thursday following an important meeting (via video conference) of EU finance leaders to negotiate the terms of a pandemic response funding plan.

Leaders formally endorsed a €540 billion rescue package that was drawn up earlier this month to cover lost wages and fund healthcare systems, which they agreed should go into effect from 1 June.

In addition, Germany threw its support behind a proposal for an even bigger recovery fund that will be set up and run by the European Commission.

However, while the approval of Europe’s largest economy to accept additional costs was viewed as a positive, leaders were unable to find common ground on the exact size and nature of the fund.

Specifically, whether it will issue grants or loans to the worst effected countries and regions.

French President Emmanual Macron insisted the fund will need to issue 'real economic transfers, not only loans'. Italian Prime Minister Giuseppe Conte expressed optimism, saying the idea of a join recover fund was 'unthinkable until now'.

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