EUR/USD Exchange Rate Heads Higher Despite Growing Concern for Eurozone Economy
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.3% today, with the pairing currently trading around $1.216.
The Euro (EUR) rose today following the release of October’s Eurozone Industrial Production data, which beat forecasts and rose by 2.1% month-on-month.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, commented on the report:
‘Eurozone manufacturing had a good start to the fourth quarter, reversing a stumble at the end of the third quarter. The headline was boosted by solid gains in production of capital and intermediate goods, by 2.1% and 2.6% respectively, with durable goods output increasing by 1.5%.
‘Overall, these data are encouraging in an environment where services activity is taking a hit due to new virus restrictions.’
However, EUR traders are becoming more concerned about the Eurozone’s economy, with Germany set to enter Covid-19 lockdown restrictions from Wednesday 10th January.
Markus Söder, Bavaria’s Prime Minister, said:
‘If we’re not careful, Germany could quickly become Europe’s problem child. For that reason, we had to and we must act.’
US Dollar (USD) Falls as Demand for Safe-Haven Assets Fall on Covid-19 Vaccine Rollouts
The US Dollar (USD) has continued to suffer this week with demand for safe-haven currencies being compromised as confidence grows in Covid-19 vaccine rollouts.
As a result, demand for the safe haven ‘Greenback’ has suffered on growing hopes that the global economy could begin to make a steady recovery from the coronavirus pandemic.
However, the USD has begun to claw back some of its losses as doubts begin to grow over the US stimulus package.
With Congress deadlocked on stimulus, demand is growing for the US Dollar.
Tom Essaye, the founder of the Sevens Report, was more cautious, however, commenting:
‘At this point, markets have priced in and are expecting stimulus near term, so if that really does not happen by the 18th (the new budget dead-line) that will be a mild headwind.’
Any further signs of deadlock over the US stimulus package, however, could continue to bolster demand for the ‘Greenback’ and push the GBP/USD exchange rate upward.
Nonetheless, with Covid-19 vaccine rollouts throughout the UK and Europe, demand for the ‘Greenback’ is expected to remain muted in the near-term.
EUR/USD Forecast: Could a Gloomy Eurozone Economic Outlook Drag Down the Single Currency?
US Dollar (USD) investors will be awaiting tomorrow’s release of the US Industrial Production data for November.
Any improvement in the US industrial sector could improve confidence in the American economy.
However, the US Dollar (USD) is likely to remain subdued as risk sentiment continues to improve as Covid-19 vaccines are rollout out to stem the spread of the virus.
Meanwhile, the Euro (EUR) could lose some of its gains if the outlook for the Eurozone’s economy continues to deteriorate.