1. Virus Situation
The outlook for EUR remains tied to the EU's ability to overcome its coronavirus pandemic. At present, the outlook appears bleak, with many European countries entering third waves and reinstating or prolonging economically damaging lockdown restrictions. Vaccinations remain frustratingly slow, a result of ongoing supply constraints and rising anti-vaccine attitudes.
2. The Monetary Policy outlook for the ECB
Even though the FED and BOE are nowhere close to hawkish, they are far less dovish than the ECB, who has decided to front-load asset purchases to keep EU bond yields from rising too fast. The string of contradicting comments also shows a possible growing rift among the GC which could prove problematic when it comes to potentially altering policy in the months ahead.
3. The country’s economic developments
The vaccination roll out and additional lockdowns has weighed on EU growth prospects, with growth differentials for the EU versus the US and UK widening. Fiscal support is another factor where the EU Recovery Fund is yet to be ratified while the US and UK have both rolled out additional stimulus and plans more in the months ahead (US). For the EUR’s growth and fundamental outlook to improve, it will need to overcome its ongoing vaccination frustrations and see a significant increase in the total number of citizens vaccinated.
The outlook for EUR remains tied to the EU's ability to overcome its coronavirus pandemic. At present, the outlook appears bleak, with many European countries entering third waves and reinstating or prolonging economically damaging lockdown restrictions. Vaccinations remain frustratingly slow, a result of ongoing supply constraints and rising anti-vaccine attitudes.
2. The Monetary Policy outlook for the ECB
Even though the FED and BOE are nowhere close to hawkish, they are far less dovish than the ECB, who has decided to front-load asset purchases to keep EU bond yields from rising too fast. The string of contradicting comments also shows a possible growing rift among the GC which could prove problematic when it comes to potentially altering policy in the months ahead.
3. The country’s economic developments
The vaccination roll out and additional lockdowns has weighed on EU growth prospects, with growth differentials for the EU versus the US and UK widening. Fiscal support is another factor where the EU Recovery Fund is yet to be ratified while the US and UK have both rolled out additional stimulus and plans more in the months ahead (US). For the EUR’s growth and fundamental outlook to improve, it will need to overcome its ongoing vaccination frustrations and see a significant increase in the total number of citizens vaccinated.