GBP/EUR: Will US Service Sector Data Pull Pound Lower vs Euro?
  • Euro (EUR) supported by vaccine optimism & easing lockdown restrictions
  • Yesterday’s PMIs point to double dip recession
  • US Dollar (USD) declines on safe haven flow
  • US data drop includes GDP, durable goods, FOMC minutes

The Euro US Dollar (EUR/USD) exchange rate is extending gains for a second straight session on Wednesday. The pair settled +0.4% higher on Tuesday at US$1.1888, towards the upper end of the daily traded range. At 09:15 UTC, EUR/USD trades +0.17% at US$1.1909.

The mood in the market remains upbeat as investors remain focus on vaccine developments from earlier in the week, even though it could still be several months before any covid vaccine is widely available.

A viable vaccine is desperately needed. This was confirmed by yesterday’s European PMIs which show the region heading for a double dip recession after lockdown restrictions were reimposed in November. However, news that French President Macron is easing lockdown restrictions after claiming that the second wave has passed is keeping the mood in the market buoyant and risk assets in demand. European stock markets are heading higher reflecting the risk on mood.

There is no high impacting Eurozone data due for release today, leaving the Euro to be driven by sentiment.

The US Dollar is edging lower across the board on Wednesday in risk on trade and safe haven outflows. Vaccine optimism is keeping risk appetite elevated, as is improving clarity over the US political situation as the transition process continues.

Risk sentiment has improved as outgoing President Trump’s administration began cooperating with the transition to a Joe Biden Presidency. Reports that market friendly Janet Yellen could become the next US Treasury Secretary is also helping . The markets are reading this as a sign that Joe Biden could be more interested in the economic recovery than pursuing aggressive regulatory policy.

There is a slew of US economic data which is due for release later in the session ahead of Thursday’s Thanksgiving holiday. These include the minutes to the latest FOMC meeting, durable goods, jobless claims and GDP data.