USD/EUR Outlook:
The USD/EUR rate is slightly weaker, currently trading below its recent average and near the lower end of its 3-month range. With no strong supporting factors for either currency at this moment, movements are likely to be limited.
Key drivers:
• Rate gap: The Federal Reserve's current approach to interest rates has kept the US dollar relatively strong, while the European Central Bank has maintained a more accommodative stance.
• Risk/commodities: Rising oil prices have caused some inflation concerns, potentially impacting the euro due to increased costs in the Eurozone.
• One macro factor: Recent data on consumer confidence in the Eurozone revealed a lackluster improvement, suggesting weaker economic sentiment that may inhibit the euro's strength.
Range:
The USD/EUR rate is expected to test the lower side of its recent range, with limited movement towards the higher end.
What could change it:
• Upside risk: A stronger US GDP print or labor market data could boost the USD further and challenge the current dynamic.
• Downside risk: Unexpected economic improvements in the Eurozone or a significant decline in US job growth could support the euro against the dollar.
