The Dollar Prices for this Times , and What are the Expected Moves?

The dollar prices for this Times , And what are the expected moves?

Get the latest on the foreign exchange market. Read before you start to open US dollar deals with iFOREX.

Europe to go Neck and Neck with US in Economic Recovery

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Although for a while the US made headlines for a staggering number of cases, it wasn’t long before the global superpower reigned supreme when it came to getting a handle on the Covid-19 pandemic. First there was the explosion of vaccination campaigns, followed by the country’s characteristic economic buoyancy. But now it seems Europe is poised not just to catch up with the US, but potentially outrun it in terms of economic recovery, and for those with an eye on any foreign exchange currency pair containing EUR, such as EUR/USD, the most popularly-traded pair in the world, you’re definitely going to want to keep reading before you start to open US dollar deals with iFOREX. 

The proof is in the PMI

One way to take the temperature of general economic health is by consulting the Purchasing Managers Index, or the PMI, which can indicate prominent trends in both the manufacturing and service sectors, thus lending insight into overall economic activity. Essentially, the reading indicates market conditions as seen by purchasing managers, notably whether they seem to be increasing, remaining still, or tightening, which is then used by analysts and investors to make more informed decisions.

One such PMI reading that many investors found helpful came toward the end of August because it contained a considerable uptick for the euro area in overall economic progress that overshadowed the otherwise stagnant progress of both the US and British economies. The reasons? For one, both countries experienced a hefty drop in the service sector, owing to shortages of workers (perhaps Brexit is partially to blame for the UK’s decline) as well as a number of “logistics issues,” according to Bloomberg, not to mention the fact that the effects of the massive fiscal stimulus both countries imbued upon themselves are starting to diminish. And that’s where Europe finds itself in the spotlight. 

Why is Europe so different?

One of the main reasons Europe is finally having its moment comes down to its vaccination campaign which, although rocky at the start, is finally in full-bloom and proving successful. Then there’s the most obvious, that being Europe’s own recovery stimulus program, the aptly-named NextGenerationEU recovery fund, which is finally taking effect to the tune of 800 billion EUR. Hard-hit countries like Italy are finally receiving their share of the recovery pie, with 25 million EUR already in their coffers by August. So, while it seemed Europe was lagging behind all this time, they were more likely biding their time behind the scenes, and can now focus on full-strength economic recovery with a huge plan in action.

EUR/USD progress

When it comes to the exchange market, those in search of volatility got a front row view of a particularly tumultuous year, although the peaks and valleys mainly kept within the same range. For example, as the year began and the vaccination campaign in the US quickly exceeded that of Europe, EUR/USD prices tumbled 4.9% between January 6th and March 30th, before recovering 4.5% nearly two months later by May 25th. Summer hit and even though vaccinations got underway, service-oriented industries like travel remained a bit shaky, which could partly explain the 4.7% tumble EUR/USD took between the end of May and August 19th. Lately, however, it seems a slow and steady uptick is in the cards, as demonstrated by the EUR/USD increase of 1.8% between mid-August and September 5th. 

The bottom line

Where will EUR head next? Will the NextGenerationEU bolster prices upwards, or will the strain of a potential fourth wave of infections stir up investor sentiment? While the past year has been fraught with volatility due to various unprecedented factors, can we expect the next few months to show signs of relief, or are we in for more uncertainty? 

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