Throughout January, the euro weakened towards the US greenback, shifting from 1.2228 to 1.2139. Within the view of economists at MUFG Financial institution, EUR/USD correction decrease is not going to final.
Key quotes
“We may effectively see the correction prolonged additional into February and returning to ranges under 1.2000 for a interval is actually believable. There’s a sturdy seasonal bias favouring EUR weak point within the early a part of the calendar 12 months, particularly when there have been good points within the closing interval of the earlier 12 months. However the elementary justification for this correction turning right into a extra sustained transfer is much less compelling.”
“The ECB’s personal December projections highlighted the comparatively small impression EUR good points had on inflation. We don’t dismiss the considerations the ECB have – however this must be seen as pointing to motion, however at EUR ranges notably increased than the place spot trades now.”
“COVID-19 vaccination roll-outs throughout the eurozone stay effectively under the UK and the US and with social unrest fuelled by anger over COVID-19 restrictions escalating, there’s a actual urgency for a quickening of roll-outs. Our present assumption is that is extra the eurozone being behind the curve in signing offers however that this may grow to be much less of a difficulty within the coming month or so and we should always start to see catch-up that alleviates considerations over any appreciable divergence in timings of lockdowns being reversed. Hospital capability can be much less of an issue throughout the eurozone.”
“We don’t see any of the obvious elements weighing on EUR sentiment are credible in reversing the appreciation pattern. Rotation into non-USD property as world progress picks up nonetheless seems a believable state of affairs that can assist assist EUR going ahead.”
