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US Dollar Undermined as Biden Optimism Cheers Markets
The Euro to US Dollar exchange rate surged last week on the back of improving market sentiment.
This upbeat market mood was, of course, centred on the inauguration of Joe Biden as the 46th US President and hopes he will be able to pass a $1.9 trillion stimulus package, as well as showing more leadership during the pandemic than the previous administration.
However, these losses were tempered somewhat in the latter half of the week as renewed coronavirus concerns soured market sentiment.
The Euro, meanwhile, started slowly last week as Italy’s government came under threat of collapse. While the Euro’s negative correlation with the US Dollar quickly saw it strengthen as the latter weakened, the single currency faced another setback in midweek trade as it was undermined by concerns over the EU’s slow rollout of coronavirus vaccinations.
But the EUR/USD exchange rate rallied again in the latter half of the week, lifted by both the European Central Bank’s (ECB) relatively upbeat outlook for 2021 as well as some upbeat PMI figures.
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International moves can involve various monetary decisions – from investment in foreign property, to international money transfer and moving savings. Due to the renewed coronavirus concerns the exchange rate market is facing significant fluctuations. Securing an exchange rate will protect you from any unfavourable shifts in the currency market. Moreover, conducting currency transfers without charging fees means saving money which could be spent enjoying your new life abroad as an expat.
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US and German GDP Releases in Focus
So far this week, the EUR/USD exchange rate has begun to give ground as some pushback against Biden’s stimulus plans has dented market risk sentiment.
However, there is scope for the pairing to rally again with the publication of the latest US GDP figures, where a positive growth reading from the world’s largest economy at the end of 2020 could cheer markets and weaken safe-haven demand for USD. This upbeat mood may be reinforced by the Federal Reserve, which looks set to reiterate its commitment to its accommodative monetary policy following the conclusion of its first meeting of 2021.
Meanwhile, the focus for EUR investors will be on Germany’s own GDP release. This may help to further bolster the EUR/USD exchange rate if it reveals that Germany managed to avoid a contraction of growth in the fourth quarter, as this would result in the country likely escaping a double-dip recession this winter. However, any upside in the Euro remains potentially limited, amidst ongoing concerns over the EU’s slow vaccination progress.
What Does this Mean for Expats?
If the market mood remains mostly positive this week, expats using Euros to purchase USD may get more for their money. However, a stronger US Dollar would be negative for any expats sending money back to Europe.
When you need to move money abroad talk to currency experts TorFX and find out how to make your money go further. Click here to get a free quote or to access their online trading platform to view live rates.
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