EURUSD extends its gains to its highest level in five months

Mohammed Abdelkhalik
May 25, 2021

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EURUSD Outlook – 26th May 2021

EURUSD extended its gains in the morning of forex trading on Tuesday in the European market, and recorded the second consecutive daily rise, reaching its highest level in five months, this strength comes after the data that met expectations about confidence rates in the German business climate, in addition to The weakening of the US dollar.

The EURUSD pair traded at $ 1.2262, the highest since last January, up by 0.4% from today’s opening session at $ 1.2215.

EURUSD chart - 24th May 2021

EURUSD rose after strong data for the German economy

Business expectations started to perform well, according to the Ifo Institute, business expectations rose from 99.2 points to 102.90 in May, better than the median estimate of 101.4.

In the same period, the current valuation increased from 94.2 to 95.7 while the business climate improved from 96.6 to 99.2, the two were better than expected at 95.5 and 98.2.

The German economy contracted at a faster rate than expected during the first quarter, as the country’s economy contracted by 1.8% in the first quarter after recording a growth of 0.3% in the fourth quarter of 2020, and this decline was less than the average estimate of 1.7%, and as a result. , Down 3.4% year-on-year.

Most of the deflation was due to the closures implemented by the government to curb the new wave of the epidemic, and this resulted in weak household consumption, which decreased by 5.4%. Likewise, government investments and exports also decreased in the first quarter.

However, there is a possibility that the economy will rebound in the second quarter since the country began to reopen, especially as the government is also promoting the launch of the Coronavirus vaccine.

The euro also rose due to the weakening of the US dollar, as the dollar index fell by more than 0.20% as inflation concerns faded, and the currency also fell against most emerging market currencies such as the Chinese yuan and the South African rand.

Monetary policy officials at the Federal Reserve Bank are still sticking to the current monetary policy, stressing that high inflation rates are temporary, which reduced expectations of tightening monetary policy soon.

Later in the day, the US dollar will react to the latest data on US new home sales, and on levels of consumer confidence in the economy this May.

Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.