EUR/USD Exchange Rate Heads Higher as Eurozone Economy Shows Signs of ‘Stabilising’
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.4% today, with the pairing currently fluctuating around $1.225.
The Euro (EUR) rose against the ‘Greenback’ today after the Eurozone’s economy saw a rebound in December, with the Eurozone’s Composite PMI rising to 49.8, beating forecasts and climbing against last month’s 45.3.
Chris Williamson, the chief business economist at IHS Markit, commented:
‘The data hint at the economy [being] close to stabilising after having plunged back into a severe decline in November amid renewed Covid-19 lockdown measures.
‘The fourth-quarter downturn consequently looks far less steep than the hit from the pandemic seen earlier in the year, though the picture is very mixed by sector.’
As a result, EUR traders have become cautiously optimistic about the bloc’s economic recovery in 2021.
Nevertheless, Eurozone market confidence has been tempered by news that Germany – the bloc’s largest economy – would re-enter lockdown in January to curb the spread of Covid-19.
US Dollar (USD) Falls as US Employment Rises and Risk Sentiment Improves
The US Dollar (USD) has continued to suffer from improving risk-sentiment as Europe prepares to rollout the Covid-19 vaccine.
As a result, demand for the safe-haven ‘Greenback’ has been compromised by increasing optimism over the global economy’s ability to recover in 2021.
In US economic data, today saw the release of the latest US Building Permits data for November, which beat forecasts and rose to 1.639 million.
Today also saw the release of the US Initial Jobless Claims data for December which rose above forecasts to 885 thousand.
Joseph Trevisani, an Analyst at FXStreet, commented:
‘The return of labor problems and increases in unemployment claims, in addition to reporting the changes in the labor market, brings back the unpleasant shocks of March and April. The greenback cannot recover until the facts change.’
Meanwhile, the US Dollar (USD) has also suffered from bullish comments from the Federal Reserve, which revealed a brighter forecast for the world’s largest economy.
Again, demand for the safe-haven ‘Greenback’ has suffered because of an upbeat Federal Reserve.
Investors have continued to seek out riskier assets as the outlook for the global economy continues to improve.
EUR/USD Outlook: Could Strong German Business Climate Data Boost the Euro?
The US Dollar (USD) is likely to remain subdued this week as the outlook for the global economy continues to improve following the news that Europe would be rolling out Covid-19 vaccines.
Tomorrow will also see the release of Germany’s Business Climate report for December.
Any improvement in the outlook for the Eurozone’s largest economy could continue to push up the EUR/USD exchange rate.