Monthly Wrap: EUR – Euro buoyed by Eurozone outlook

Key Takeaways:

• Euro benefits as outlook improves for Eurozone economy
• Could rising Eurozone PMIs further boost the single currency?
• EUR Monthly lows: £0.85, $1.19, C$1.45, A$1.54, NZ$1.66
• EUR Monthly highs: £0.87, $1.22, C$1.51, A$1.57, NZ$1.70

The euro fluctuated last month before strengthening as the outlook for the Eurozone’s economy steadily improved.
 
After France and Germany suffered spikes in Covid-19 infections in April, cases have declined through May and helped support the single currency.
 
EUR exchange rates have also received support from the EU’s Covid-19 vaccination efforts gaining momentum, which has sparked demand for the single currency as Europe opened up many of its large economies by the beginning of May.
 
However, at the end of April the euro experienced a sharp drop after the Eurozone first quarter GDP growth rate revealed the bloc slipped into a double-dip recession during the first three months of 2020.
 
But the dip didn’t last long, the single currency soon recovered following more optimistic Eurozone and German data releases and a dip in the US dollar.
 
Eurozone PMI data revealed the service sector returned to growth territory in April and overall business activity grew more than expected.
 
Economic data from Germany also added strength to the Eurozone’s outlook and EUR exchange rates, with strong data for inflation, retail sales, industrial, and economic sentiment all boosting the single currency.
 
Looking ahead, EUR traders will be monitoring the European Central Bank’s (ECB) monetary policy and comments about the state of the Eurozone’s economy.
 
If the ECB maintains it’s increasingly positive attitude over the next few weeks, then we could see the single currency head higher against its peers.
 
The latest Eurozone PMI figures for May will also drive EUR movement. If the service sector continues to grow and manufacturing remains near record highs, the euro will likely strengthen.
 
We could see the EUR head even higher over the course of the next few weeks as the EU’s Covid-19 vaccination efforts and easing of lockdown measures throughout Europe will likely improve the Eurozone’s outlook.