The Euro currency is recently behind the US dollar, although both of them lead the financial markets. And while the dollar is dealing with its general weakening, the euro attempted to maintain its current positions.
Euro's dynamics changed due to the macroeconomic data, primarily from Germany. Recent reports from this country supported the single currency, strengthening its position. According to statistics, Germany's consumer confidence index in March 2020 increased from the revised February estimate (-15.5 points) to -12.9 points. Moreover, the Euro is also supported by optimistic reports on the German economy for the fourth quarter of 2020. It rose by 0.3%, which was stimulated by the growth of investments and exports. In particular, the lowered consumer and government spending in Germany. In the fourth quarter of last year, investments in fixed assets rose by 1%, while the volume of exports by 4.5%. At the same time, consumer spending in Germany fell by 3.3% amid renewed restrictions due to COVID-19.
Thus, we can say that the current situation contributed to the Euro's growth. On the night of February 25, its price surged to the high that started from January 2021. By the end of the Thursday session, the euro against the dollar increased from the previous $ 1.2164 to $ 1.2239. In addition, the euro also reached a record high of $ 1.2240. However, such positivity was temporary, as the euro lost some of its gains this morning. And although it attempted to catch up, it did not end well. On Friday morning, the EUR/USD pair was trading near the range of 1.2153-1.2154. It should be noted that the pair has been hovering around a wide range of 1.1950-1.2350 this past few weeks. So, this trend continues.
The Euro currency benefited from the US dollar's weakness again, not missing a chance to grow. However, this excessive strength is not included in the ECB's plans. Currency strategists at BNY Mellon say that it is a warning signal for the regulator. At the same time, ECB officials are more concerned about the euro's growth rate, rather than the specific levels of the EUR/USD pair. Analysts at BNY Mellon believe that as soon as the pair reached the level of 1.2500 by the March meeting, the regulator will try its best to weaken the euro.
Currently, commodity and bond markets are at the heights of its popularity. In this regard, the ECB is keeping a close watch at the Eurozone's financial situation. According to Philip Lane, ECB's Chief Economist, the agency uses the purchase of bonds to prevent the situation from getting worse. On Thursday, the sell-off in the European bond market paused after Lane's statements, but then resumed a little later. At the same time, Eurobond yields continued to grow. The regulator is ready to ease the financial conditions soon that are incompatible with the measures to counter COVID-19, but have a negative impact on the projected dynamics of inflation in the euro area. It can be recalled that ECB includes euro's continuous growth among the negative factors that prevent reaching the 2% inflation target.
The approval of a new aid package in the United States in the amount of $ 1.9 trillion is another important factor that can trigger the dynamics of the EUR/USD pair. A decision on this issue will be made today. Experts warn that if the full assistance package is approved, inflation could rapidly surge. This is facilitated by the next inclusion of the US media. The implementation of such a scenario can "inflate" the stock market to an incredible size. Fearing such a scenario, many investors leave the US dollar. If this develops, the national currency will deteriorate in the financial market, risking being under the pressure of a sharply growing money supply.