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Contrary to the forecasts of economists, unemployment in the Eurozone did not decrease, remaining at the same level of 8.3% (forecast was 8.1%). The number of unemployed rose by another 48,000 in February, Eurostat said this morning.
Despite the data presented on the European labor market, which turned out to be more pessimistic, the euro keeps the positions it won yesterday against the dollar. While the US dollar at the beginning of today's European session is strengthening against most of its competitors, the EUR/USD pair at the time of publication of this article is traded at the closing level of yesterday's trading day and 1.1815 mark.
However, the strengthening of the euro and the growth of EUR / USD should probably be treated with skepticism and caution so far. Economists suggest that the euro may strengthen, including against the US dollar, on the expected increase in the forecast for global economic growth by the International Monetary Fund. Its meeting will begin on Tuesday at 24:00 (GMT), and the IMF forecasts will also be published around the same time. In January, the IMF predicted that the global economy will grow 5.5% in 2021, while in 2020 it was estimated to decline by 3.5%.
The growth of the EUR / USD pair will still be limited, according to economists. Despite the increase in the number of cases of COVID, vaccinations in the United States are progressing faster, while the situation with Covid-19 in the Eurozone remains problematic, and the American economy is recovering faster and stronger than the European one. The US economic situation is improving, as evidenced by a strong March nonfarm payrolls report released last Friday, while data released yesterday showed the ISM purchasing managers' PMI in services rose to 63.7 in March from 55.3 in February, accelerating to an all-time high.
The improved outlook for the US economy and "excellent" labor market data for March will not prompt the Fed to raise interest rates anytime soon, Cleveland Federal Reserve Bank President Loretta Mester said on Monday. “I believe that the second half of this year will be extremely successful (for the economy), however, we are still far from the targets”, Mester said.
At the same time, some market participants believe that increased inflation will force the US Federal Reserve to raise interest rates faster than expected, which will confirm a reversal of the dollar's downtrend.
On Wednesday at 18:00 (GMT) the minutes of the March FRS meeting will be published. Most likely, the minutes will confirm that most of the Fed leaders expect a short-term acceleration of inflation. And if they send any hints or signals regarding the possibility of curtailing the stimulus program, then the dollar may receive another strong support against the backdrop of rising yields on US government bonds (the yield on 10-year US bonds has stabilized around 1.700%, just below the local multi-month high of 1.776%), rapid rates of vaccination in the United States (US president Biden promised that 200 million Americans would be vaccinated by April 30) and thanks to the outstripping growth of the US economy, especially relative to the European economy.
Thus, the dollar has the potential to strengthen further in the short term, including against the euro.
