As the European economy improves soon, the euro will rise to $ 1.25

Euro expected to rise to $1.25 this summer - ING

The euro may rise above $1.25 this summer as eurozone economic growth catches up with the US and the Federal Reserve's ultra-soft policy puts pressure on the dollar, ING reported.

“The first quarter was pretty bleak for the eurozone's economic data, but this is likely to change in the coming months as the pace of vaccinations picks up,” says Petr Krpatata, ING's currency strategist.

Equally important, the dollar's strength seen in the first quarter is weakening and the currency is no longer responding positively to the positive US data as much of the good news has already been heeded, he said. This, he said, coupled with the fact that the Federal Reserve keeps interest rates low even as inflation rises, should weaken the dollar.

For his part, ING currency strategist Francesco Pesole adds that the dollar, which is predominantly a safe-haven asset, could weaken if US companies report strong first-quarter quarterly earnings on Wednesday, easing fears of rising coronavirus cases in the world.

"Any improvement in market sentiment should renew the dollar's decline, which is apparently justified by the short-term underestimation of all G10 currencies against the US dollar and the fact that much of the US leadership role in the global economic recovery appears to be reflected in prices.", he says.

The DXY dollar index was up 0.1% to hit 91.3580.

TD Securities also believes that the euro may rise, but admits only a slight strengthening. And he calls an optimistic assessment of the economic prospects of the eurozone at a meeting of the European Central Bank on Thursday as a condition for this.

“Overall, the optimistic outlook we expect suggests some moderate upside risks to the [EUR / USD] spot rate, but only a very tight monetary signal could lead to a clear upside breakout as the 100-day moving average (1.2058) helps restrain the rise of the single currency, ”TD analysts said.

They believe that the recent trading ranges for EUR / USD should be maintained. Analysts expect the ECB to say it expects short-term economic weakness due to continued quarantine restrictions, but will improve its outlook in the second half as vaccinations accelerate. The Euro costs $ 1.2004.