The Euro to US Dollar (EUR/USD) exchange rate pushed higher today due to broad US Dollar weakness and strong German economic data.
At the time of writing the pair are currently trading at around $1.2135.
Euro (EUR) Supported by Upbeat German Business Confidence
The Euro found itself gaining today following data from the German Ifo Business Climate indicator for February.
The Ifo Business Climate rose to 92.4, beating forecasts of 90.3 and is the largest increase in four months.
As a result of the data, Euro investors become increasingly optimistic about the outlook of the Eurozone’s economy and its recovery from the coronavirus pandemic.
Carsten Brzeski, an analyst at ING, commented on the data:
‘The latest Ifo index numbers show that optimism has returned to the German economy as many businesses seem to have joined financial markets in looking through any adverse short-term effects from ongoing lockdowns and the slow start of the vaccination rollout.’
The Euro has also found support today in the continuing weakness of the US Dollar, the negative correlation between the pairing has bolstered EUR today.
US Dollar (USD) Weakens as Risk Appetite Increases
The US Dollar opened the week struggling against the Euro, as global risk appetite increases amidst falling coronavirus infections and an increase in countries rolling out vaccines.
Despite US treasury yields rising, a risk-on mood has soured the US Dollar sentiment..
Investors also remain wary over President Joe Biden’s proposed $1.9 trillion stimulus package as democrats begin the final push to get the package through congress.
Speaking on Friday, President Biden said:
‘Critics say my plan is too big, let me ask them: What would they have me cut? What would they have me leave out? Should we not invest $20 billion dollars to vaccinate the nation?’
Euro to US Dollar Outlook: Eurozone Inflation in Focus
For Euro investors, this week sees the release of both Eurozone inflation and final Q4 GDP Growth data from Germany.
Core Inflation for the Eurozone in January is forecast to have risen 1.2% from December, an increase in prices could show that the Eurozone economy is on the road to recovery, which would push the single currency higher.
Furthermore, German GDP for Q4 of 2020 is expected to show a modest increase of 0.1%, which would help Germany avoid a double-dip recession.
US Dollar traders will again be keeping an eye on jobless claims this week, with the figure forecast to be around 810,000, the US economy could continue to freefall, and USD would suffer.
USD investors will also look to Federal Reserve Chair Jerome Powell’s two-day testimony in front of Congress later this week. Powell is expected to voice support for President Biden’s stimulus package, which could help democrats get the relief through congress.
The EUR/USD exchange rate will also be moved by any further coronavirus developments, as more cities in the US open back up, USD could see an uptake in traders buying into the currency.