EUR/USD Exchange Rate Edges Higher as Confidence Grows in Eurozone Economy
The Euro US Dollar (EUR/USD) exchange rate rose by 0.3% today following the publication of the latest Eurozone retail sales figure for March, which beat forecasts and rose by 12% year-on-year. The pairing is trading around $1.20 at the time of writing.
As a result, the Euro (EUR) has clawed back some of its losses against the ‘Greenback’ this week as the outlook for the Eurozone’s economy continues to improve.
Bert Coljn, the senior economist for the Eurozone at ING, commented on the report:
‘For the months ahead, retail is still expected to show some catch-up as restrictions are expected to ease further. Consumer confidence is almost back at pre-pandemic levels, savings have increased and unemployment has been coming down over the course of the second wave. This makes a quick rebound in domestic demand a likely prospect for the summer months, helping GDP to be quick out the gates once restrictions are eased more structurally.’
Today also saw the publication of the latest German factory orders figure for March. The Eurozone’s largest economy’s factory orders beat forecasts and rose by 3% month-on-month.
The European Union’s (EU) vaccination campaign continues to gain traction as lockdowns are being gradually lifted throughout Europe.
But with signs that the Eurozone’s economy being on the road to recovery, EUR investors are becoming hopeful that the bloc could emerge out of its recession in the months ahead.
US Dollar (USD) Falls Ahead of US Nonfarm Productivity and Jobs Data
The US Dollar (USD) has shed some of its gains against the single currency today despite comments from US Treasury Secretary Janet Yellen about potential rate hikes.
‘It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy.
‘So it could cause some very modest increases in interest rates to get that reallocation. But these are investments our economy needs to be competitive and to be productive.’
In US economic news, today will see the release of the flash nonfarm productivity figure for the first quarter.
Any further improvements in the outlook for the world’s largest economy could weaken demand for the safe-haven ‘Greenback as investors seek out riskier assets instead.
Today will also see the release of the latest US initial jobless claims for April. If America appears lodged in an unemployment crisis, however, then we could see USD further suffer.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
US Dollar (USD) traders will monitor tomorrow’s release of the latest nonfarm payrolls data for April. If this points to a robust improvement in the outlook for the US economy, then we could see the USD/EUR exchange rate head higher.
Tomorrow will also see the publication of April’s US unemployment rate. Any signs of improvement in the US labour market would be USD-positive.
Euro (EUR) investors will eye tomorrow’s release of the latest German industrial production figure for March. If this shows an improvement in the Eurozone’s largest economy, then the EUR/USD exchange rate could continue to head higher.
The Euro US Dollar (EUR/USD) exchange rate could also benefit from tomorrow’s German trade balance report for March. If exports show signs of improvement, then confidence in the Eurozone’s powerhouse economy would continue to grow, buoying the single currency.