Is the euro's rally over? The "V" recovery of the economy has been dashed.

The recently released economic data shows that the euro zone economy seems to suddenly lose momentum again this month, because the epidemic situation in this region is on the rise again, which also poured cold water on investors who had previously bet that the European economy could get out of trouble earlier than the other side of the Atlantic.

At one time, investors thought that under the background that the epidemic situation in the United States worsened and the number of new infections in Europe seemed to be stabilized and controlled, the pattern of "the United States is strong and Europe is weak" that persisted in the economic fundamentals in the previous decade could be reversed at least in the next six months, which should drive the euro exchange rate to record a more considerable increase. However, since August, after the second round of epidemic broke out in Europe, the economic data of the euro zone has also fallen sharply again. The expectation of "taking the lead in recovery" has therefore become a bubble.

Because the epidemic forced some isolation measures to restart, the service industry in the euro zone was hit hard, which also made the expectation of "V" recovery become a bubble, and it was inevitable that the road to economic recovery would face more twists and turns. The initial PMI data of the euro zone series released last Friday directly confirmed this point, which also pushed the euro exchange rate further lower and fell back to the mark of 1. 18. Previously, optimistic investors had expected the euro to reach the 1.20 mark earlier than expected. Now, this prediction can only be said to be too optimistic.

Previously, after the EU countries reached an unprecedented joint financial aid agreement through arduous negotiations in July, the exchange rate of the euro once rose reactively, reaching a new high against the US dollar in more than two years. Especially after the European Union's mutual aid agreement accompanied by the new American aid plan was dystocia in Congress. However, the recent situation shows that the number of new infections in the United States has dropped from the previous high point, while the number of new infections in Europe has reached a new high since April. This has reversed the direction of market sentiment.

The detailed comparison of the data shows that the economic fundamentals of "strong America and weak Europe" have not really reversed even temporarily. On the one hand, the number of American employees has rebounded rapidly since it bottomed out in April. On the other hand, the number of employed people in the euro zone has dropped for five consecutive months, which is enough to prove in turn that the global economic momentum has not even appeared temporarily as expected. On the contrary, the COVID-19 epidemic has done more harm to the euro zone economy, which has fallen into a persistent structural dilemma. In particular, countries such as Spain and Italy, which are already in a difficult situation in this region, have been particularly hurt by this year's epidemic. Last Friday's PMI data also showed that the level of economic activity in these two countries fell into recession again.

Therefore, analysts pointed out that the euro zone economy is still at a crossroads, and the future direction depends entirely on the degree and speed at which the epidemic can subside and the extent to which the European Union and the European Central Bank can provide further assistance to member States. However, the market is still worried about the implementation prospect of the new EU aid policy, especially because there are still many differences among EU countries. At the same time, the new epidemic prevention measures after the resurgence of the epidemic have once again hit economic activities.

Spain, Italy and Greece in the "European Pig Five" countries were forced to close some catering and entertainment facilities or limit their business hours and scope again. This move coincides with the summer entertainment season, which means that its negative impact will be particularly heavy. However, many industries hit by the epidemic, such as hotels, tourism and aviation, have not yet recovered. Industry organizations had predicted that the level of tourism activities in Germany would not return to the peak of 20 19 until 2024, while the situation in other euro areas would only get worse.

Therefore, in the face of the dilemma between the epidemic and the economy, German Chancellor Angela Merkel called other leaders in the euro zone last week and asked them to avoid a new round of economic blockade and travel restrictions as much as possible to avoid further economic losses. But this means that the spread of the virus may be more difficult to be completely blocked, further prolonging the epidemic cycle. This dilemma exists not only in the euro zone, but also in many parts of the world.

The continued spread of the global epidemic has also made the market's safe-haven demand for US dollar cash continue to exist, which will put extra downward pressure on the euro against the US dollar on another level. Earlier, Bank of America analysts pointed out that the rising prospect of the euro exchange rate was mainly due to investors' blind optimism about the European economic prospects and excessive pessimism about the US epidemic and political situation. After the emotional reversal, it is inevitable that the euro will peak in the middle of the year, and it is expected to fall back to 1. 14 at the end of the year.