About six months ago, the euro returned to its usual environment of recent years, which was characterized by lower euro movement. When we observe moves in the EUR/USD pair, almost all of them stem from the US Dollar (USD). This contrasts with what happened in the spring, when the German fiscal package and turmoil in the United States also caused the value of the euro to rise. Michael Pfister, foreign exchange market analyst at Commerzbank, points out that the US lockdown has not changed this.
The euro’s movements are still driven almost entirely by the US dollar
“At first glance, things may look different this week. The US will release second-tier data again (November labor market report postponed), and Fed officials are entering a blackout period ahead of next week’s meeting. Jerome Powell is expected to speak on a committee again, but is unlikely to announce anything surprising close to the meeting.”
“Meanwhile, the Eurozone will release its first inflation estimates for November tomorrow. The only question is whether we can expect a significant reaction from the Euro to the numbers. As we have often stressed, in the days leading up to the Eurozone figures, a large proportion of national figures are released, which can be compiled with little effort. This month, for example, we received the headline figures from Germany, France, Italy and Spain on Friday. With figures from the Netherlands due tomorrow morning, more than 80% of the data is likely to be “Available by then, so there is little chance of surprises.”
“Although our economists expect a slight year-on-year increase in both key and benchmark interest rates, this is unlikely to change the overall mood significantly. In short, even with the new data, there is currently little reason to reassess the situation in the Eurozone, and therefore there is good reason to allow the euro to move in one direction or another. As for larger moves in EUR/USD, we must therefore remain focused on the US dollar for the time being.”
