- EUR/USD resumes the upside well above 1.2000.
- EMU, German Manufacturing PMI surprised to the upside.
- Chairwoman Lagarde due to speak later in the session.
The buying interest around the European currency gathers extra pace and lifts EUR/USD to new daily highs around 1.2060 at the end of the week.
EUR/USD bid after positive PMIs, looks to Lagarde
EUR/USD fades Thursday’s negative price action and resumes the march north to the 1.2060/70 band following the resumption of the downside pressure around the greenback and auspicious results from euro fundamentals.
Indeed, advanced Manufacturing and Services PMIs in the core Euroland (France, Germany, and the euro bloc) came in above expectations for the month of April, all indicative that the morale in those sectors remain firm.
Adding to the pair’s upside, the greenback looks offered against the backdrop of increasing outflows into the risk complex and absence of traction in yields of the US 10-year reference, which keep navigating near recent lows around 1.54%.
Also adding to the upbeat note in the single currency, the ECB published its quarterly Survey of Professional Forecasters (SPF), where inflation tracked by the broader HICP is seen higher this year (1.6% vs. 0.9%) and unchanged in 2022 and 2023 (1.3% and 1.5%, respectively). Regarding the GDP, the SPF now sees the economy of the region expanding a tad lower in 2021 (4.2% vs. 4.4% from the previous forecast), 4.1% next year (from 3.7%) and 1.5% in 2022 (unchanged).
Later in the session, Chief Lagarde will participate in the panel “A Global Tipping Point: The Power of Global Capital Markets in the Fight Against Climate Change”.
Data wise across the pond, Markit will also publish its flash gauges seconded by March’s New Home Sales.
What to look for around EUR
EUR/USD moved to fresh peaks around 1.2080 before losing some traction amidst the resurgence of dollar demand and volatility on fresh coronavirus woes. The continuation of the rally has been so far supported by the renewed offered bias in the dollar along with the investors’ shift to the growth prospect in Europe now that the vaccine campaign appears to have gained some serious pace. In addition, solid results from key fundamentals and the improvement in the sentiment in the euro area as of late also appear to bolster the momentum surrounding the single currency.
Key events in the euro area this week: ECB Lagarde speech (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund.
EUR/USD levels to watch
At the moment, the index is gaining 0.35% at 1.2056 and faces the next hurdle at 1.2079 (monthly high Apr.20) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6). On the other hand, a breach of 1.1953 (50-day SMA) would target 1.1919 (200-day SMA) en route to 1.1762 (78.6% Fibo of the November-January rally).
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