- Euro (EUR) rises despite surging covid cases & tighter lockdown restrictions
- Eurozone manufacturing PMI beats forecasts
- US Dollar (USD) slips on safe haven out flows
- US manufacturing PMI later, Senate vote in Georgia tomorrow
The Euro US Dollar (EUR/USD) exchange rate is trading higher at the start of the new week and the new year. The pair is hovering around 1.23 after rebounding from 1.2230 earlier in the session. At 09:15 UTC, EUR/USD trades +0.6% at 1.2295.
The Euro is pushing higher, extending gains from 2020. Investors are seemingly shrugging off concerns over the rapid spread of covid, particularly new strains in UK and South Africa and the slow deployment of the covid vaccines.
Euro area manufacturing data also provided a reason to cheer. The manufacturing sector grew at the fastest pace in 2.5 years in December. The growth was led by Germany, which experienced its fastest rate of expansion in almost 3 years.
The Eurozone manufacturing PMI rose to 55.2 in December, up from 53.8 in November.
The increased rate of growth came even as governments across the region struggle to contain the spread of covid with tighter lockdown restrictions. The latest restrictions have mostly been confined to the services sector with restaurants and bars closing whilst manufacturers have been able to continue. This means that the sectors downside has been limited and it performs significantly better than in the slump in activity seen in the first lockdown in March / April.
The US Dollar was the weakest major currency in 2020 and the greenback appears to be kicking off 2021 in a similar fashion. The US Dollar Index dropped 7% last year, in it first annual loss since 2017.
The US Dollar is weakening on Monday amid a broad upbeat mood in the financial markets. The risk on mood as reflected by stronger equity markets and expectations that US interest rates will remain low for a prolonged period of time is dragging on demand for the safe haven USD.
US manufacturing PMI figures will be in focus later today, whilst the Senate vote in Georgia tomorrow and US non-farm payrolls data on Friday mean a busy week could be in store for the US Dollar.