Euro to US Dollar (EUR/USD) Exchange Rate Heads Higher Despite Germany Extending Lockdown Restrictions

Euro to US Dollar (EUR/USD) Exchange Rate Rises as German Retail Sales Beat Forecasts in November

The Euro to US Dollar (EUR/USD) exchange rate rose by 0.2% today, with the pairing currently trading around $1.22.

The Euro (EUR) rose today following the release of the latest German Retail Sales report for November, which indicate a strong 2020 as the figure rose by 5.6% year-on-year.

Analysts at Reuters presented a more cautious picture for the German economy, however, saying:

‘The Statistics Office said its provisional full-year retail sales growth figure – contrasting with an expected drop of 5.5% in gross domestic product, according to Bundesbank data – included December’s full lockdown.

‘It also said the estimate was “freighted with greater uncertainties” than usual due to the pandemic.’

Today also saw the release of the German Unemployment Rate for December, which confirmed consensus at 6.1%.

However, as Germany has extended its national lockdown, Euro investors are becoming increasingly concerned about the Eurozone’s largest economy going forward.

US Dollar (USD) Sinks on Positive Risk Sentiment

The US Dollar (USD) has continued to be undermined by positive risk sentiment.

With new Covid-19 vaccine rollouts across Europe, the UK and the US, global markets are more optimistic that we could see a slowing down of coronavirus infections in the coming months.

Additionally, demand for the US Dollar has slipped on growing optimism that the Democrats could win seats in Georgia’s Senate.

This would hand President-elect Joe Biden a majority to pass a US stimulus package.

However, US President Donald Trump warned:

‘If the liberal Democrats take the Senate and the White House – and they’re not taking this White House. [W]e’re going to fight like hell.’

As a result, USD investors are remaining cautious, as a flare up in US political developments could further limit the appeal of the US Dollar.

In US economic news, today will see the release of December’s ISM Manufacturing PMI.

As a result, we could see downward pressure on ‘Greenback’ increase if US domestic manufacturing activity took a fall last month.

EUR/USD Outlook: Could Improving Risk Sentiment Continue to Drag Down the US Dollar?

Euro (EUR) investors will be awaiting tomorrow’s publication of the latest flash German inflation data for December.

Any signs of the German economy, which is the largest in the Eurozone, improving could buoy the single currency.

Tomorrow will also see the release of the final Eurozone PMI Composite for December.

Again, if this shows any signs of steady growth in the bloc’s economy, we could see EUR rise.

Meanwhile, US Dollar (USD) traders will be awaiting tomorrow’s publication of the latest ADP Employment Change figure for December.

If this shows an increase in US unemployment, then we could see the ‘Greenback’ continue to struggle.

The EUR/USD exchange rate will continue to be driven by global risk sentiment this week.

If Covid-19 vaccines continue to promise a stronger economic rebound this year, we could see USD continue to fall.