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A less US-centric recovery hope helps the euro. The shared currency is set to take advantage of the recent outperformance of cyclical stocks, according to economists at MUFG Bank.  

The better performance of Euro Stoxx cyclical stocks illustrates a potential shift in expectations

“The Euro Stoxx 600 cyclical index relative to the overall Euro Stoxx Index has begun to outperform after a period of underperformance. Cyclicals outperformed from May last year through to 25th February but then went into a period of under-performance through to the end of March. Cyclicals have again started to outperform and is taking EUR/USD higher now. This cyclical performance relative to the overall market performance correlates tightly with EUR/USD and if this can be sustained it would suggest further EUR/USD gains are possible.”

“The outlook on vaccinations is improving and the pessimism that existed in March has diminished. As of data published yesterday by the ECDC, a median of 64.4% of people aged +80yrs have now had their first vaccine across 24 reporting EU countries. EU commission spokesperson Stefan De Keersmaecker stated the EU target of 55% of populations being vaccinated by the end of June and ultimately 70% by the end of the summer were still achievable.”  

“The outlook now relative to elsewhere looks a little less concerning, prompting liquidation of EUR short positions. That could have further to run over the short-term.”