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Euro Rallies on Upbeat Sentiment, Later Falls on Weak German Inflation

January 6, 2021 at 14:29 by Simon Mugo

Stacks of shiney euro coins plus some notes

The euro today initially dipped against the dollar as Democrats took the lead in the Georgia Senate runoff elections, which could lead to a shift in US corporate laws. The EUR/USD currency pair later rallied as investor sentiment improved despite IHS Markit releasing several disappointing PMI prints from across the euro area.

The EUR/USD currency pair dipped to a low of 1.2276 during the Asian session before rallying to a high of 1.2349 in the mid-European session but was off these highs at the time of writing.

The currency pair initially dipped lower as the US Senate elections tipped heavily in favour of Democratic candidates, which would give the party a majority, and President-elect Joe Biden the power to impose tough corporate laws. The downbeat France consumer price index report for December released by Insee had a muted impact on the resurgent pair. The pair dipped lower after the disappointing Markit Germany Services PMI, while the weak Markit Eurozone Services and composite PMIs also had a minimal impact on the euro.

The European Medicines Agency (EMA)’s a recommendation that Moderna’s COVID-19 vaccine can be used in adults over 18 years, also boosted the pair.

The pair later fell after the release of downbeat Germany consumer price index report for December. According to the Federal Statistical Office, Germany’s inflation rose 0.6% missing expectations by 0.1% as did the annualised print, which came in at -0.7%. Investors sold the pair on the news.

The currency pair’s future performance is likely to be affected by tomorrow’s German factory orders and eurozone inflation data.

The EUR/USD currency pair was trading at 1.2297 at 14:28 GMT having dropped from a high of 1.2349. The EUR/JPY currency pair was trading at 126.93 having rallied from a low of 126.14.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.