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Euro US Dollar Exchange Rate Strengthens as Global Market Mood Buoyed

Euro US Dollar

The Euro US Dollar exchange rate is strengthening today following the European Central Bank’s (ECB) decision to keep interest rates unchanged in its most recent policy meeting.

At the time of writing, the Euro US Dollar pairing are trading at around $1.1968 as the global market mood is more upbeat following President Joe Biden’s stimulus package being passed through Congress.

Euro (EUR) Investors Remain Cautious Following ECB Comments

The Euro found itself steady today following on from the ECB’s decision to keep interest rates at 0%.

However EUR investors remain cautious after the ECB announced it will accelerate the pace of its bond-buying programme

In addition, ECB President Christine Lagarde’s press conference earlier today cooled bond yields.

Commenting on the recent rise in bond yields Lagarde said:

‘If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy.’

‘This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity.’

The Euro has found support against the US Dollar today as the negative correlation between the pairing has benefited EUR.

However an upbeat market mood has pushed the Euro down against many risk-correlated currencies.

US Dollar (USD) Limits Losses on Back of Employment Data from US

The US Dollar is struggling today after President Joe Biden’s stimulus package was voted through Congress, a move that caused the global market mood to soar higher.

However, limiting the US Dollars losses today is the upbeat jobless claims data from the US. Although the number claiming benefits is still worryingly high, the reading fell to its best level in 3 months.

Analysts at Oxford Economics commented on the data saying:

‘The drop may be signalling a turning point for labour market conditions, however the data continue to suffer from noise related to issues of backlogs and fraud. We expect a more sustainable labour market recovery to take hold closer to mid-year with broader vaccine distribution and the arrival of more fiscal support.’

Euro US Dollar Exchange Rate Outlook: US PPI Data in Focus

US Dollar investors tomorrow will see the release of the producer price index (PPI) US which is expected to show slowing of PPI inflation, potentially supporting investor’s move away from Treasury yields.

Euro investors will themselves be keeping an eye of Eurozone industrial production data which is expected to show a growth in the sector after a negative reading in December, adding further support to EUR.

Furthermore, the release of Germany’s inflation rate data tomorrow morning is expected to confirm that inflation picked up in February, potentially lending some support to the Euro.