March 4, 2021: Euro and Dollar (EUR/USD) remains trapped in the range 1.1950 – 1.2350 – Westpac
The sluggish recovery of EUR/USD reflects slower distribution of stimulus packages and Covid vaccines. Economists at Westpac believe the 1.1950 – 1.2350 range is likely to remain in place until the European Central Bank (ECB) meeting on Thursday, March 11.
Key takeaways:
“The introduction of the Covid vaccine in the EU has suffered from several logistical and bureaucratic obstacles. Although the total number of vaccines administered in the region is now close to 35 million, this is quite a backlog compared to initial hopes and is decidedly less than in the UK (>21 million) and the US (>85 million).”
“Regional blocking measures may be on the verge of easing, but there are growing concerns about the persistence of new COVID-19 cases as new variants become established. The economic consequence is a potential delay in the recovery, which could undermine the optimism expressed in recent PMIs.”
“The ECB has underlined that it will maintain the flexibility of the PEPP and that it has further policy tools to provide support if needed. This could well be an issue at next week’s ECB meeting.”
“EUR/USD is likely to be held in an effective range of 1.1950-1.2350.”
Source: fxstreet.com
March 2, 2021: Euro and Dollar (EUR/USD) will trade higher this year – HSBC
The euro strengthened against the U.S. dollar in the fourth quarter of 2020. FX hedging flows and a slight improvement in the current account may explain EUR strength, according to HSBC economists, who expect EUR/USD to rise this year, but if old ties are rekindled, it could weigh on the single currency.
Key takeaways:
“In recent years, EUR/USD movements have been much more closely linked to ‘other investment’ flows, rather than portfolio investment flows. FX hedging flows have become more important and may remain so for the foreseeable future, possibly due to lower hedging costs as the Federal Reserve has lowered its policy rate and remains persistently dovish under its new average inflation target.”
“There was also a modest improvement in the eurozone current account surplus at the end of 2020, mainly due to the stabilization of eurozone exports relative to the continued decline in imports. This may have helped explain part of the rise in the EUR late last year.”
“The EUR is likely to strengthen against a weaker USD in 2021 as U.S. monetary conditions remain loose and risk appetite continues to be supported. However, if short-term U.S. interest rates move higher or longer-term yield differentials widen significantly, we could see a more sustained upswing in the USD.”
Source: fxstreet.com
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