Eurozone data has held up well considering the vaccine debacle and renewed lockdowns in France et al. But the US/EZ growth and yield gap story should keep EUR/USD under pressure, with 1.1600 now in sight, as reported by Westpac.
See: EUR/USD to tank towards 1.16 as Europe set to maintain tighter restrictions for longer – MUFG
US growth expectations ramp higher
“The bad news from the Eurozone has been relentless, especially the largely self-inflicted debacle over slow vaccine rollouts and failure to contain the spread of Covid-19 variants. France is just the latest major EZ nation to impose new restrictions, ensuring a very subdued start to Q2.”
“It should be noted that some recent data indicate a degree of resilience in the eurozone economy. Despite the grim coronavirus news, preliminary March PMIs improved versus February, including a stunning 62.4 for the manufacturing PMI. The EC’s economic sentiment index easily beat expectations and the headline German IFO index reached a high since June 2019.”
“US growth expectations continue to ramp higher and a range of strong US data seems likely to be released in coming weeks, notably March payrolls out over Easter. Rising Treasury yields have driven the 10yr premium over Bunds beyond 200bp.”
“EUR/USD price action may be orderly, but fresh five month lows in the low-mid-1.16s beckon.”