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Euro US Dollar Exchange Rate Looks to Sustain Gains as Eurozone’s Outlook Starts to Improve

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Euro US Dollar Exchange Rate Benefits from Week of US Dollar Losses 

Investors sold the US Dollar (USD) throughout last week, making it easier for the Euro US Dollar (EUR/USD) exchange rate to advance. Signs of recovery in the EU’s coronavirus situation are also supporting the Euro. 

Since opening this week at the level of 1.2050, EUR/USD has been trending with a largely upside bias. Yesterday, EUR/USD touched on a February high of 1.2146. 

While EUR/USD is sliding back slightly from its highs today, the pair still trends above the key level of 1.21. EUR/USD is trending in the region of 1.2111 at the time of writing. 

Key Eurozone growth data and Fed meeting minutes are likely to be big focuses for Euro to US Dollar exchange rate investors next week. 

Euro (EUR) Exchange Rates Benefit as Eurozone’s Coronavirus Outlook Starts to Improve 

For much of the past week, the Euro (EUR) has been benefitting from losses in its biggest rival, the US Dollar (USD). This is because the two currencies share a negative correlation, one often benefits from the other’s weakness. 

However, the Euro has also been more appealing as the EU’s coronavirus situation has finally shown more signs of improving

Yohay Elam, Analyst at FXStreet, said: 

‘After nearly stalling for several weeks, fresh deliveries of covid vaccine doses have revived the old continent’s efforts. Moreover, AstraZeneca – a pharmaceutical that had been on a collision course with the EU over supplies – plans to double its output. 

Germany has announced a further improvement in its coronavirus statistics. Europe’s locomotive has seen a drop of active COVID-19 cases to around 155,000, the lowest since late October. Other countries are also seeing tentative declines from the peak.’ 

This combined with anticipation for next week’s Eurozone data is helping the Euro to hold most of its gains. 

US Dollar (USD) Exchange Rates Weighed as US Data Shows Weakness 

The US Dollar has been sold en masse over the past week. Investors have been taking profit from the US Dollar’s jump in demand last week, and demand for the currency is also being weighed by the market outlook. 

Markets are becoming more optimistic about global economic recovery again. This is dampening appetite for safe havens like the US Dollar. 

Some recently weak US data has also been weighing on the US Dollar’s appeal. Signs of weakness in the key US job market are rising, with yesterday’s US jobless claims report also disappointing. 

Still, investors are hesitant to sell the US Dollar too much. The US coronavirus outlook is gradually improving as vaccines are rolled out and fiscal stimulus is planned. 

Euro US Dollar (EUR/USD) Exchange Rate Awaits Key Data and Fed Meeting Minutes 

Next week will likely be a busier week for the Euro to US Dollar exchange rate. Following this week’s relatively quiet economic calendar, there are many key datasets and events expected next week. 

Eurozone trade balance data is due on Monday, with key job market and growth rate data due on Tuesday. 

If the Eurozone economy performed better than expected towards the end of 2020, it could boost optimism that the bloc’s economy is weathering the coronavirus pandemic well. This would boost the Euro as well. 

Later in the week, the US Dollar could be influenced by key data. Wednesday’s session will be key for the US Dollar as US retail sales will be published, as well as the Federal Reserve’s latest meeting minutes report. 

Then at the end of the week, PMI projections from Markit could give Euro US Dollar (EUR/USD) exchange rate investors a better idea of the Eurozone and US economy’s health.