Euro is in a Multi-year High as USD Weakens

Euro is in a Multi-year High as USD Weakens

Amid the growing risk sentiment with the vaccine optimism among investors, the euro rises to a two and a half year high.

The EUR/USD pair closed last week above the $1.19 threshold and continued the momentum until this week.

In the latest charts, it currently trades at $1.1996, which is its highest since May of 2018.

This came despite the growing number of cases in the eurozone and the successive partial lockdowns adopted by the bloc’s largest economies.

According to analysts, investors are more concerned about the United States’ economic recovery, which still flags at the moment.

Last week, the country reported weaker-than-expected GDP growth for the quarter. In addition, it had lukewarm labor sector data amid a growing number of initial jobless claimants.

With this, the US dollar index is more optimistic about the Eurozone’s recovery. It is perceivably more efficient in handling the coronavirus pandemic.

The United States still leads the charts with the most number of cases, which caused downward pressure for the USD

Ironically, the European Central Bank’s statement of the need to keep using fiscal stimulus to keep the economy afloat provided little to no sway to spectators’ resolve.

Germany, the bloc’s biggest economy, also reports a larger fall in the inflation rate than expected at 0.3%. This, too, provided no significant movement in the foreign exchange market.

 Experts in the field noted that while the pair is mostly in the green the past month, the prospect for further gains is very limited.

The euro is likely to release some of the prior gains. This comes as risk-off sentiment emerges, should anticipated events not live up to expectations.

Dollar Continues to Weaken but at a Slower Pace

The dollar continues to record a losing streak. It is weighed down by the optimistic vaccine news as Moderna becomes the latest biotechnology firm to seek emergency-use approval.

Similarly, the prospect for further monetary easing from the Federal Reserve also adds to the gloomy tone.

The US dollar index, which tracks the performance of the greenback against other currencies in the basket, edged down by 0.1% and settled at 91.748.

It started trading steady at the 91-point threshold last week, eroded by the growing risk appetite among traders.

Confidence in the market shifted attention from safe-haven assets, particularly from the USD, now that people are already betting on life at the end of the pandemic.

Optimism for the effective inoculation propelled buying for risky assets and away from the world’s reserve currency.

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