Stock markets in decline, how does Euro react?

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On 28 October 2020 the value of the main stock indices fell by several percentage points both in Europe and USA. A very strong decline in stock prices was first recorded by the European stock market, when, the German stock index DAX, showed a daily decline of -4.06% points. Subsequently, this sentiment spread to the markets in the United States, where the stock index DJIA fell by -3.43% points and the S&P 500 index showed a daily decline of -3.53% points. However, morning trading on the Forex market signals a strengthening of the Euro (EUR).

According to analysts, this situation of total sales in the beginning of the new season has no real justification in retrospective, except for emotional actions and investor behavior with regard to the ongoing global pandemic crisis and the ongoing US presidential election. On 29 October at 07:21 am CET the single European currency, the EUR traded against the US dollar (USD) on the foreign exchange – Forex market at a mutual exchange rate of US$1.176 per EUR, with the daily strengthening of the EUR by +0.09% of the exchange rate against the USD so far. According to the forecast of analysts at Societe Generale, the exchange rate of the global currency pair EUR/USD can be expected during the next year in the range of US$1.20 to 1.30 per EUR.

This trend of strengthening European currencies against the USD did not apply only to the EUR but also, for example, the British pound (GBP). On 29 October at 07:28 am CET the GBP/USD currency pair traded on the Forex market at a mutual exchange rate of US$ 1.302 per GBP, with the daily appreciation of GBP by +0.32% against the USD.

According to analysts and financial strategists a slight recovery of the stock market can be expected by the end of this week, especially in the US, where investors will be interested in the financial results of giant companies such as Amazon, Apple, Facebook or Alpabet. They should be available on 29 October. The fact is that just four of these companies represent the market value of more than 5 trillion US dollars. On the same day preliminary information is to be provided on gross domestic product (GDP) in the US for the third quarter of 2020. The growth rate is expected to slow down. Based on these facts, along with the prediction of possible post-election confusion in the US presidential election, experts expect a continuing decline in the exchange rate of the USD against the EUR.

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