March 3, 2021 - Written by John Cameron
STORY LINK Euro to US Dollar (EUR/USD) Exchange Rate Steady on Underwhelming Eurozone Data
EUR/USD Exchange Rate Rangebound as EU Lockdowns Weigh on Eurozone Economy
The Euro to US Dollar (EUR/USD) exchange rate was largely muted today, with the pairing currently fluctuating around $1.20.
The Euro has suffered this week owing to largely underwhelming Eurozone economic data. Germany’s retail sales for January tumbled by -4.5, despite forecasts for a more modest contraction of 0.3%.
The Federal Statistics Office commented:
‘This decline can be explained by the ongoing coronavirus lockdown, which meant a closure of many retail stores since Dec. 16, 2020.’
Today also saw the publication of the latest Eurozone PMI Composite report for February, which came in at a lacklustre 48.8.
Chris Williamson, the Chief Business Economist at IHS Markit, was pessimistic in his outlook for the Eurozone’s economy, commenting:
‘A fourth successive monthly drop in business activity puts the eurozone economy on course for a double-dip recession, though an easing in the rate of decline underscores how the latest downturn appears far less severe than the initial hit from the pandemic last year.’
Consequently, EUR investors are remaining cautious about the Eurozone’s economic recovery, especially now that Germany, the bloc’s largest economy, is facing an extended lockdown until late March.
US Dollar (USD) Exchange Rate Rises Despite US Stimulus Optimism
The US Dollar rose against the single currency today despite demand for the safe-haven currency being compromised by growing optimism in the success of US President Joe Biden’s stimulus programme.
The $1.9 trillion proposal for Covid-19 stimulus has already successfully passed through the House of Representatives, and now faces the Senate. But many USD investors are confident that it will pass through unchallenged.
As a result, demand for the safe-haven US Dollar has fallen now that the outlook for the global economy looks altogether brighter.
Covid-19 cases continue to fall worldwide, and the effectiveness of vaccinations is being consistently proved.
In US economic news, today saw the release of the latest US Composite PMI for February, which beat forecasts and rose to 59.5.
Chris Williamson commented on the report:
‘Despite headwinds of COVID-19, extreme weather, and record supply chain delays, US businesses reported the fastest output growth for almost six years in February.’
‘The data add to signs that the economy is enjoying a strong opening quarter to 2021, buoyed by additional stimulus and the partial reopening of the economy as virus related restrictions were eased on average across the country.’
GBP/USD Exchange Rate Forecast: US Dollar to Fall on Growing US Stimulus Optimism
US Dollar investors will be awaiting tomorrow’s speech from the US Federal Reserve Chairman Jerome Powell.
Any dovishness about the US economy, however, could drive-up demand for the safe-haven USD.
Tomorrow will also see the latest US Initial Jobless Claims report, which is expected to rise to 750 thousand. As a result, we could see the USD begin to struggle.
Euro traders will be eyeing tomorrow’s release of the latest Eurozone Retail Sales data for January. If these improve, then the EUR/USD exchange rate would head higher.
Demand for the US Dollar could continue to fall this week, however, as safe-haven demand will likely be compromised by growing optimism in the US’s historic Covid-19 stimulus programme.
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TAGS: American Dollar Forecasts Pound Dollar Forecasts