Forex forecast for today. Supply chain constraints affect Euro/Dollar (EUR/USD)
The European currency rose against the US Dollar (USD) to 1.1775.
The index of business activity in the manufacturing sector in March rose to the highest level since 1983 and was significantly higher than expected. Wells Fargo analysts say the key factors were supply chain constraints. Delays and the lack of necessary materials resulted in inflationary pressure. The US economy is recovering faster than in other parts of the world, and while the rest of the world will sooner or later reduce the handicap, the temporary divergence in economic growth trajectories is in line with forecasts of imports outpacing exports this year.
Jens Weidmann, a member of the governing council of the European Central Bank, said on Thursday that the growth of the Euro Zone economy in 2021 may not meet the ECB's forecasts if the measures to combat the pandemic are extended. In its latest forecast, the Central Bank said the Euro zone economy would grow by 4% in 2021. Financial cost indicators for individuals and companies may not yet fully reflect changes in bond yields. At the same time, the growth in US securities yields moderates the intensity after a sharp increase in February–March. The Fed is expected to begin discussing cuts in bond purchases in late 2021 or early 2022, with the first rate hike not expected until 2023. Thus, the US Dollar still does not receive the maximum support from monetary policy for further growth.
In the forecast, I assume a decline in Euro/Dollar (EUR/USD) to the level 1.1700.