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Euro to US Dollar (EUR/USD) Exchange Rate Rangebound as Outlook for Eurozone Economy Darkens

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EUR/USD Exchange Rate Steady on Downbeat Eurozone Economic Data

The Euro to US Dollar (EUR/USD) exchange rate held steady today following the publication of the latest Eurozone Retail Sales data for January, which fell by a worse-than-expected -5.9% month-on-month. The pairing is currently fluctuating around $1.20.

As a result, EUR investors are becoming more concerned about the outlook for the Eurozone’s economy, which appears to be heading for a double-dip recession.

Bert Colijn, the senior economist for the Eurozone at ING, was downbeat in his assessment, saying:

‘Clearly, the restrictive measures on retail in some of the larger eurozone economies continue to bite. The retail shutdown in Netherlands and Germany started mid-December and lasted for all of January, which caused another sharp decline in activity. In France, sales also contracted sharply, again related to the cancelled sales period and curfew put in place.’

Added to this, the EU’s delay on rolling out Covid-19 vaccines earlier this year has put a dampener on confidence in the bloc’s economic recovery in the coming months.

US Dollar (USD) Steady as Safe-Haven Demand Sinks on US Stimulus Optimism

The US Dollar failed to rise against the single currency today as risk sentiment continues to improve. With markets becoming more confident that President Joe Biden’s $1.9 trillion stimulus package will pass through Senate, demand for the safe-haven currency has fallen.

In US economic data, today saw the release of the latest Nonfarm Productivity data for the fourth quarter. The figure fell by -4.2, sparking concern for the American economy’s ability to recover in the months ahead.

Analysts at Reuters said:

‘U.S. worker productivity fell at its sharpest pace in nearly 40 years in the fourth quarter, the government confirmed on Thursday, though the trend remained solid.

‘The Labor Department said nonfarm productivity, which measures hourly output per worker, dropped at a 4.2% annualized rate last quarter, instead of the previously reported 4.8’% pace. That was still the deepest rate of contraction since the second quarter of 1981.’

Today also saw the publication of the latest US Initial Jobless Claims figure for February, which rose to 745 thousand.

As a result, USD investors are becoming more concerned about rising unemployment jeopardising the nation’s economic recovery this year.

EUR/USD Forecast: Could US Stimulus Success Weaken Demand for the Safe-Haven ‘Greenback’?

Euro investors will be eyeing tomorrow’s release of the latest German Factory Orders data for January.

Any improvement in the outlook for the Eurozone’s economy would be EUR-positive.

Meanwhile, in US economic data, tomorrow will see the release of the influential NonFarm Payrolls figure for February, which is expected to rise to 182 thousand.

As a result, we could see the USD/EUR exchange rate head higher as the outlook for the world’s largest economy improves.

The EUR/USD exchange rate could rise, however, if the US stimulus plan succeeds through the Senate. The safe-haven ‘Greenback’ would suffer as a result.