The euro US dollar exchange rate advanced at the start of this week. The pair settled slightly lower to end last week at US$1.2118, although booked gains of over 0.6% across the week, explains Fiona Cincotta of Currency Live.

The euro had been under pressure over recent weeks owing to concerns over the slow rollout of the Covid vaccine in the region. However, there are signs that the program is starting to ramp up, which is offering support to the common currency.

The broad risk-on mood in the market is lifting the common currency. Recent data suggests that the Pfizer vaccine is 94% effective according to real-world data. Hopes are growing of a quicker economic recovery.

Whilst there is no high-impacting Eurozone data Monday, German ZEW sentiment numbers and fourth quarter GDP numbers on Tuesday could drive some movement in the single currency. Stronger than forecast numbers could lift the euro.

However, Friday’s preliminary manufacturing and service sector PMI figures could be even more influential. Investors have been concerned that the slow vaccine rollout will prolong the economic hit from the pandemic. Signs that PMI data is improving could calm such fears and make the euro appear more appealing.

A softer tone surrounding US dollar has lifted the pair. Last week the US dollar fell across the board following dovish comments from Federal Reserve Chair Jerome Powell and amid rising optimism that Joe Biden’s massive fiscal stimulus package is moving closer towards being approved. US House Speaker Nancy Pelosi said that she hopes to have the Covid relief plan approved by the end of February. With Trump’s impeachment trial over, attention is likely to remain focused on US stimulus.

There is little on the US economic calendar at the start of the week, with FOMC meeting minutes, US retail sales and PMI data due in the second half of the week.

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