EUR/USD Exchange Rate Rises as Risk-Sentiment Improves
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.4% today. The pairing is currently trading around $1.190.
The US Dollar (USD) suffered today as demand for safe-haven currencies such as the ‘Greenback’ has fallen following further reports of successful Covid-19 vaccine trials.
Today saw the UK’s AstraZeneca/Oxford vaccine revealed an average efficacy of 70% and a 90% success for one dosage plans.
Despite this falling below their rival’s Pfizer and Moderna, increased hopes of a Covid-19 vaccine have weighed on demand for the safe-haven USD.
In upcoming US economic data, today will see the release of the latest Manufacturing PMI for November.
A downbeat outlook for America’s economy could, however, spark demand for the US Dollar as the world’s largest economy struggles to shake off the coronavirus pandemic.
Euro (EUR) Rises Despite Disappointing Eurozone Data
The Euro (EUR) edged higher against the USD today despite dismal Eurozone economic data pointing to a worse-than-expected downturn for the bloc’s economy in the months ahead.
Today saw the release of the flash Eurozone PMI Composite data for November, which fell into contraction territory at 45.1.
Chris Williamson, the chief business economist at IHS Markit, commented:
‘The Eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections.
‘The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter. “The service sector has once again been the hardest hit, especially consumer-facing and hospitality businesses, though weakened demand has also taken a toll on manufacturing.’
Despite this, the EUR/USD exchange rate has headed higher as demand for the US Dollar – the Euro’s largest competitor – has slipped significantly more owing to positive Covid-19 vaccine news.
However, we could see demand for the Eurozone begin to slip as Eurozone markets digest the now more likely of a significant contraction or the bloc in the fourth quarter.
EUR/USD Outlook: German Business Climate Data in Focus
Euro investors will be awaiting tomorrow’s release of the German IFO Business Climate report for November.
Any deterioration in the outlook for the German economy, which is the largest in the Eurozone, would prove EUR-negative.
Tomorrow will also see the release of Germany’s GDP figure for the third quarter.
Again, any signs of a dark outlook for Germany’s economy would prove EUR-negative.
The US Dollar (USD) could likely remain under pressure this week as optimism grows over the prospect of a rollout of a Covid-19 vaccine.
However, we could see the EUR/USD exchange rate sink if global economic volatility increases, sparking demand for the safe-haven ‘Greenback’.