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Euro US Dollar Exchange Rate Edges Lower on Federal Reserve Outlook

Euro US Dollar

The Euro US Dollar (EUR/USD) exchange rate has edged lower during the start of this morning’s session after the Federal Reserve took a more positive outlook surrounding the US Dollar’s economic recovery.

At the time of writing the EUR/USD paring are trading at around $1.2115 as an increase in German unemployment did nothing to support the single currency.

Euro (EUR) Weakens as Eurozone Consumer Confidence Remains in Contraction

The Euro has weakened against the US Dollar slightly this morning as Eurozone consumer confidence remained in contraction at -8.1 for April.

More so, despite the latest Eurozone economic sentiment indicator jumping to 110.3 in April 2021, above pre-pandemic level for the first time since the outbreak of COVID-19 the Euro could not find any meaningful support against its rival.

It comes as even though the Eurozone has upped its vaccination programme, many countries in Europe continue to record high levels of daily cases of coronavirus.

France’s president Emmanuel Macron is expected to present an easing of restrictions tomorrow, despite hospitals in the country this week exceeding over 6,000 Covid-19 intensive care patients for the first time since during the first wave of the virus back in April 2020.  

US Dollar (USD) Supported by Upbeat Federal Reserve

The US Dollar has found itself supported against the Euro this morning following the Federal Reserve’s latest interest rate decision yesterday.

Whilst the Fed kept monetary policy unchanged as expected, a more upbeat tone from on the outlook on the US economy has caused USD to strengthen this morning.

Analysts at ING commented on the latest Fed decision saying:

‘To us, they suggest a growing optimism within the FOMC, potentially laying early groundwork for a tapering of their QE program before year-end, despite Powell saying it isn’t yet time to have that conversation.’

‘Most significantly the Fed has dropped its assessment that the pandemic “poses considerable risks”. Risks do of course “remain” and the recovery is “uneven and far from complete”, but this is a notable shift from the Fed.’

This afternoon US Dollar investors will be keeping an eye on the latest US jobless claims, which if fall again could bolster USD even higher.

Euro US Dollar Exchange Rate Outlook: Eurozone GDP in Focus

For Euro investors, tomorrow will see the release of preliminary GDP and inflation data from the Eurozone.

Whilst inflation is expected to have risen, GDP is forecast to remain in contraction at -1% for Q1, as the bloc dealt with a third wave of coronavirus, which could cause the Euro to weaken further.

US Dollar traders will be keeping an eye on the latest PCE price index for March which is expected to have risen 1.9% year-on-year which could give an added boost to the ‘Greenback’ heading into the weekend.