The U.S. dollar index rose slightly, but it has not yet recovered above the 90 threshold. The dollar/euro callback is waiting for an opportunity and is currently at 1.2232. Despite recent strong data confirming that the euro zone economy is recovering, economists at Capital Economics still believe that the euro will weaken against the dollar this year.
The Eurozone manufacturing PMI was 62.9% in April, an increase of 0.4% from the previous month. Among them, the manufacturing PMIs of Germany, Italy, France and Spain are 66.2%, 60.7%, 58.9% and 57.7% respectively, maintaining an overall expansion trend.
Allianz Four Seasons Growth Portfolio Fund Manager Zhuang Kailun also pointed out that the retail sales performance in the United States and the Eurozone has gradually returned to the level before the new crown epidemic. The rebound in consumption power is also expected to drive the profitable revenue of related companies. Growth is also expected to be the main compensation driver for the stock market this year.
Capital Economics pointed out earlier this week that U.S. economic data will continue to grow. They will revise the US dollar index forecast model and estimate that the rate of increase in U.S. long-term Treasury bond yields will exceed the long-term Treasury bond yields in the euro zone, which will make the euro exchange rate against the euro. The U.S. dollar has weakened and the U.S. dollar index is expected to rebound.
Later, they analyzed: "Although we expect the euro zone economy to continue to recover, we believe that the euro zone's growth and inflation outlook is not as strong as that of the United States, although this may be masked by the temporary reopening effect."
"The strong momentum of the Eurozone economic data relative to the United States seems to be affecting the relative expectations of the two economic and monetary policies. It was only recently that the euro stabilized when the euro continued to strengthen. We believe that the current market is raising interest rates in the Eurozone relative to the United States. Is overpriced."
They expect the European Central Bank to wait until 2026 to raise interest rates, so they expect the euro to weaken against the dollar because the market is expected to make adjustments to reflect the potential prospects of the economies of both countries.
Since the beginning of this year, the US dollar index fell below the 90 threshold in January, and rebounded to 93 in February and March. After April, the US dollar index depreciated by 2.1%, and the US dollar index fell below 90 again in May. So far this month, the U.S. dollar index has fallen nearly 0.6%, bringing its decline this year to 1.7%.
Karen Jones, head of Commerzbank's FICC technical analysis research team, said that the euro/dollar has eroded the recent February high of 1.2243, and the daily RSI has not yet confirmed the high. They remain cautious about this. She said: "The euro/dollar must remain above the recent uptrend line of 1.2150 to maintain upward pressure. Our target is still the 2021 high of 1.2349."
She also stated: "Our long-term goal is 1.2556 to 1.2619, which is the 2018 high, the 200-month moving average and the 55 quarterly average."
Rabobank foreign exchange strategist Jane Foley pointed out that the euro/dollar may rise slightly after the European Central Bank's policy meeting on June 10, but any disappointment may weaken its trend. She also mentioned that from a one-month perspective, the US dollar is one of the worst performing G10 currencies. In five days of trading, the euro performed the second best, second only to the Swedish Krona, which shows that the recent rise of the euro/dollar is also a function of the euro’s strength.