Is it time for the Euro to appreciate against USD?
For Professional Clients in accordance with MIFID
Written on 12th April 2021 by Seeyond
Let’s look at the facts:
- The Euro strongly depreciates since the beginning of the year. Especially against the US Dollar (from 1.23 to 1.17) but also against a larger basket of currencies.
- Many expect that the narrowing growth differential between the US and the Eurozone will lead to an appreciation of the Euro.
We think it is still a bit early:
- Several leading indicators indicate the Euro could further depreciate, such as the real interest rate differential between Germany and the US, continued high investor positioning on the Euro and the spread between 2-year rates in 2 years.
- Even with accelerating vaccination campaigns the economies will be reopen very gradually. In Europe, the lassitude and financial damage caused by long months of lockdown could continue to weigh on growth, whilst the US benefit from the impetus given by the two new tax plans.
- A delayed narrowing of the growth gap between the two regions will also slow down the appreciation of the Euro against the USD … unless Europe decides to implement a new stimulus plan.
Source: Bloomberg, Seeyond - January 2002 to March 2021
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