The EURUSD pair bounced back on the first day of the month as investors reflected on the latest economic data from the Eurozone.
Enter your emailThere is a likelihood that the pair will continue the bullish momentum ahead of the upcoming decision by the European Central Bank.Timeline: 1-2 days.pair bounced back on the first day of the month as investors reflected on the latest economic data from the EurozoneAdvertisementThe EUR/USD pair declined sharply last week as investors reflected on the hawkish interest rate decision by the Federal Reserve.
Now, focus shifts to this week’s interest rate decision by the European Central Bank . The decision will come a few days after the EU published strong economic data. On Monday, data by Eurostat showed that the bloc’s economy expanded by 0.3% in the fourth quarter after it contracted by about 2% in the previous quarter.
The Eurozone’s economic recovery was attributed to the strong performance in France, Italy, and Spain. These economies rebounded sharply even as the Covid-19 pandemic continued to spread. On the other hand, the biggest laggard was Germany. Therefore, the EUR/USD rose as investors started to price in a situation where the ECB signals that it will start to wind down its pandemic-era economic policies. For example, it could signal that it will end its asset purchases earlier than expected and then hike interest rates in the third or fourth quarter.
Later today, the key catalyst for the EUR/USD price will be the latest manufacturing PMI data by Markit and the Institute of Supply Management . Based on the estimates numbers published almost two weeks ago, analysts expect the data to show that the manufacturing sector held steady in January.It has erased some of the losses that it made last week.
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