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Euro US Dollar Exchange Rate Gives Up Previous Week’s Gains as Eurozone Coronavirus Jitters Persist

Euro US Dollar Exchange Rate Tumbles despite Weaker US Dollar 

The US Dollar (USD) weakened last week, but the Euro US Dollar (EUR/USD) exchange rate still ended up falling throughout the week. Investors remain hesitant to buy the Euro (EUR) due to concerns over the Eurozone’s coronavirus outlook. 

After opening last week at the level of 1.1953, EUR/USD spent most of last week trending lower. 

In the middle of the week, EUR/USD briefly rebounded and touched on a weekly high of 1.1986. However, the key level of 1.20 remains beyond EUR/USD’s reach, and the pair trended lower in the region of 1.1886 before markets closed for the week. 

Throughout the coming week, Eurozone confidence data and US growth rate data could drive movement in the Euro to US Dollar exchange rate. 

Euro (EUR) Exchange Rates Dampened by Eurozone’s Coronavirus Uncertainty 

Demand for the Euro has remained fairly soft. As the Eurozone struggles with a delayed coronavirus vaccine rollout and rising fears of being hit by a third wave of the pandemic, the shared currency remained unappealing. 

As France headed towards a new lockdown and Germany considered an extension to current restrictions, the Euro remained fairly unappealing compared to the US Dollar. The US Dollar has a comparatively more optimistic coronavirus outlook. 

Despite this Eurozone uncertainty though, Nicola Nobile at Oxford Economics said that the EU should still be able to meet its vaccination targets in the coming months: 

‘despite these bad few days, the EU target of vaccinating 70% of adults before the end of the summer is still likely to be met, in line with our view set out at the start of February.’ 

US Dollar (USD) Exchange Rates Remain Appealing despite Cautious Fed 

The Federal Reserve took a cautious stance on the US economy in its policy decision this week, in order to douse speculation that monetary policy could be tightened sooner than expected. 

Since then, the US Dollar has been a little weaker. However, the US currency has still been able to hold gains against the weaker Euro. 

Analysts are still fairly optimistic about the US economic outlook, which is helping the US Dollar as well. According to Chris Iggo, Chief Investment Officer of Core Investments at AXA Investment Managers: 

‘Equities are outperforming bonds, yields are rising, and the US curve is super-steepening. The Fed is doing a reasonable job of anchoring short-term interest rate expectations, but the longer end of the curve reflects the reflationary boom. It is making US fixed income attractive again. Yet the move up in yields is probably not over and few will be surprised now if and when the market crosses the 2% yield level. That is no disaster. The US economy is in fully party mode.’ 

Euro US Dollar (EUR/USD) Exchange Rate Could Shift on US Growth Report 

With central bank news having passed for now, the Euro to US Dollar exchange rate will be driven more by key economic data over the coming week. 

Major Eurozone and US ecostats, including Eurozone PMIs and US growth results, will be published throughout the week, especially in the second half of the week. 

March Eurozone and US PMI projections from Markit will be published on Wednesday. US durable goods orders data from February are due as well. 

Thursday will follow with German consumer confidence data and perhaps the most influential dataset of the week, US growth rate data from Q4 2020. 

If US growth was better than expected, it could boost hopes that the US economy has been resilient to the coronavirus pandemic over the last quarter too. 

Friday will round off next week with German business confidence data from Ifo, and US PCE inflation rate results, overall giving Euro US Dollar (EUR/USD) exchange rate investors plenty to react to throughout the week.