Euro US Dollar Exchange Rate Strengthens as EA PMIs Beat Expectations

Euro US Dollar Exchange Rate Firms on Impressive PMIs

The Euro US Dollar (EUR/USD) exchange rate has been improving today, after the Eurozone’s PMIs came in above expectations and EU morale is high.

The single currency also gained from a dip in the US Dollar, with recent dovish comments from the Fed buoying EUR/USD.

Euro (EUR) Climbs on Upbeat Outlook

The Euro has been climbing during today’s session, after the Eurozone’s flash PMIs for this month beat market forecasts.

Both the services and manufacturing PMIs printed above expectations, with the services figures jumping from 55.2 to 58. This was the sharpest expansion in the services sector since July 2007, and just below a record high of 58.3.

Germany’s PMIs also exceeded expectations, with both manufacturing and services activity expanding last month.

The figures come as the European Union continues to ease lockdown restrictions, particularly in hospitality, with the prospects of a strong economic recovery in the Euro area boosting morale among EUR.

Additionally, the EUR/USD exchange rate benefitted from a downside in the US Dollar, with the Euro making gains off its negative correlation with the ‘Greenback’.

US Dollar (USD) Dips on Dovish Fed Comments

Meanwhile, the US Dollar has been on the defensive today following dovish comments from Federal Reserve Chair Jerome Powell as he testified before Congress last night.

Powell reiterated his position that the recent surge in inflation was mostly transitory, which caused the tailwinds from the Fed’s hawkish announcement last week to die down somewhat.

A shift in market sentiment has also dampened demand in the safe-haven currency, as investors turn to more risk-sensitive currencies amid an upbeat market mood.

Euro US Dollar Exchange Rate Forecast: Will USD Rebound this Afternoon?

Looking ahead, the US Dollar could regain some ground this afternoon as US Treasury yields are on the rise after dipping yesterday. If the 10-year bond yields continue to recover, EUR/USD could face renewed pressure.

The US Markit PMIs could also be a defining factor in EUR/USD today. Both the US services and manufacturing figures are forecast to fall from last month, but if the PMIs beat expectations this could boost the US Dollar.

Finally, another speech from European Central Bank (ECB) President Christine Lagarde this evening may again favour USD. Lagarde has been steadfast in her loose approach to monetary policy, with previous dovish comments triggering downsides in the Euro. If her remarks continue to strike a dovish tone, we could see a dip in EUR/USD exchange rates.