The Euro was able to capitalize against the Dollar and Pound on Tuesday as the currency strengthened due to the “rapid acceleration in the rollout of vaccines in the Eurozone”. It has been clear this year that the “vaccine trade” has been the main driver of foreign exchange markets in 2021. One economist has not that “while the Pound benefited in the first quarter it would appear the Euro is now currying favour with investors as the European vaccination programme accelerates from a lacklustre start”. Barclays noted yesterday that "Recent vaccine development and looser restriction in the Euro area are supporting the EUR". In fact, a graph released yesterday conducted by NatWest Markets showed the ‘Vaccine distribution progress so far in Western Europe; many “European countries have now caught - and in some cases surpassed - the vaccination rates of” Britain and the United States.
The US Dollar found itself struggling on Tuesday as “the week has started well for global equities and commodities, resulting in some pressure on the dollar”. This, coupled with the Fed playing down inflation risk, the Dollar could depreciate further. On Monday “three Fed officials (Brainard, Bostic and Bullard) all played down concerns about persisting inflation. This has been the strongly prevailing tone since the surprisingly high inflation read for April.” Dutch Bank ING noted external factors will drive the Greenback in the near term, “with the US data calendar still very light and some Fedspeak that has so far disappointed any hawkish expectations in the market.”
GBPUSD made subtle gains on the day opening at 1.4117 and closing at 1.4132.
GBPEUR in contrast made a loss, edging closer to the 1.1500 handle. The pair started that day at 1.1598 and closed at 1.1540.
EURUSD opened Tuesday at 1.2222 and closed higher at 1.2246.