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Market sentiment against the US dollar has improved lately, while the ranks of euro fans have begun to thin out.
Recently, the mood of market participants in relation to the US dollar has improved, while the ranks of euro fans have begun to thin out.
The EUR/USD pair has already lost almost half of its growth that took place between November 2020 and the beginning of January 2021.
Progress with mass vaccination against coronavirus in the United States, steps by President Joe Biden to adopt additional fiscal incentives, as well as improved statistics on the United States are forcing investors to abandon bearish bets against the greenback.
At the same time, concerns about the expansion of quarantine restrictions in the EU and the decline in economic growth in the region are forcing market participants to curtail long positions for the single currency.
On Thursday, the dollar reached its highest level against the euro since the beginning of December.
The dollar was supported by positive macroeconomic statistics for the United States.
The ADP report pointed to an increase in the number of jobs in the private sector of the country by 174 ,000 in January. At the same time, the ISM index of business activity in the service sector rose to 58.7 points. Both indicators beat forecasts and raised expectations for the number of jobs in the US non-agricultural sector, which will be released on Friday.
According to preliminary estimates, the US economy added 50,000 jobs last month, which will be a moderate recovery after a 140,000 contraction in December.
The White House has made it clear that it is ready to compromise with the Republican Party and with moderate Democratic Senator Joe Manchin to accept the next package of assistance to the American economy.
Standard & Poor's experts believe that thanks to the support package of $1.9 trillion, US GDP can return to pre-crisis levels in the second quarter of this year.
There is an active vaccination campaign against COVID-19 in America. This gives market participants a reason to hope for an early exit of the United States from the crisis. Meanwhile, Europe continues to lag behind on this issue.
Slower than in the US, the pace of vaccination in the EU countries can cost the European economy tens of billions of euros of lost GDP, experts warn.
The EUR/USD pair remains under pressure for the fourth consecutive day on the back of the dollar strengthening on a broad front. Today, it broke through the round level of 1.2000, updating the two-month lows.
"The decline in the euro against the US dollar below the $1.2000 mark may cause a significant weakening of the positive mood towards the single currency," Nomura believes.
Although the bank is closing its bullish position on the euro, it hopes that the fall of the single currency will be short-lived.
"The euro may resume its upward trajectory from mid-February as mass vaccination against COVID-19 begins to gain momentum in the EU," Nomura strategists said.
They expect that the EUR/USD pair will reach the 1.2700 level in the second–third quarter, and then approach the 1.3000 level in the fourth.
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