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Currency outlook: Euro firms as EU vaccine rollout accelerates

- Currencies Direct

Currency outlook: Euro firms as EU vaccine rollout accelerates

Euro: EUR/GBP: Up from £0.85 to £0.86
EUR/USD: Up from $1.18 to $1.20

The euro stumbled at the end of March as EUR investors were unnerved by a resurgence of coronavirus cases throughout Europe, and the subsequent renewed restrictions in France and Germany. However, since then, we have seen the euro steadily climb higher throughout April. EUR gains have been partly due to a pullback in the US dollar but are mostly attributed to the acceleration of the EU 's vaccine rollout. Increasingly positive EUR data releases have also lent support to the single currency recently.

Looking ahead, the immediate focus for EUR investors will be on the Eurozone 's latest GDP release. This could put considerable pressure on the currency as the preliminary figures from the first quarter look set to confirm the bloc suffered a double-dip recession over the winter.

Pound: GBP/EUR: Down from €1.16 to €1.15
GBP/USD: Up from $1.38 to $1.39

The past month has seen the pound trade in a wide range as optimism over the reopening of a large portion of the UK economy was countered by profit taking and vaccine concerns. Sterling enjoyed a strong start to April, with the news that the UK government would be proceeding with its plan to reopen the economy on 12 April helping propel the GBP/EUR exchange rate to a one-year high of €1.18. However, the pound struggled to sustain these gains as it was undermined by a bout of profit taking as well as concerns over the safety of the AstraZeneca vaccine, which has seen wide use in the UK.

Turning to May, the Scottish parliamentary elections will be a key focus for GBP investors as a strong showing for the Scottish National Party could raise the possibility of another independence referendum.

USD: USD/GBP: Down from £0.72 to £0.71
USD/EUR: Down from €0.84 to €0.83

The US dollar came under considerable pressure throughout April, mostly as a result of a series of dovish comments from Federal Reserve Chair Jerome Powell. These saw Powell mostly dismiss concerns over rising inflation, whilst also suggesting that the Fed 's next rate hike is unlikely to take place until at least late 2022. Also denting USD exchange rates has been a weakening of safe-haven demand in recent weeks as an improving global economic outlook has helped to lift the market mood.

Looking ahead, the upcoming US GDP figures could provide a boost to the US dollar in the short-term, amidst expectations for a healthy expansion of growth in the first quarter. However, the longer-term outlook will largely depend on market sentiment, with USD likely to suffer if the mood becomes increasingly upbeat.

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