The Euro is Under Pressure From the Coronavirus
The EUR is under pressure due to growing concerns about the coronavirus in Europe. Yesterday, Germany declared strict isolation before Easter and extended other measures until April 18. Italy and much of France are also under restrictions, delaying the region's economic recovery. The euro/dollar exchange rate retreated by more than 100 points from last week's high and came close to the lowest value since November last year.
Danske Bank economists continue to view April as a turning point in terms of overcoming the global crisis and avoiding new restrictions in the fall. Given the strong growth, the US will reach the pre-crisis level of GDP growth in the third quarter of this year, and in the Eurozone and Japan it will take much longer. The US economy will significantly outperform other regions in 2021 due to strong political support and faster rollout of vaccination. The bank raised its expectations for US economic growth to 7.5% in the current 2021, almost double the previous estimate. Analysts expect the Fed to allow inflation to rise without offsetting it by prematurely tightening monetary policy, and predict that the core consumer price index will approach 2% by the end of 2022. In the euro area, after peaking at 1.6% in the fourth quarter of 2021, core inflation will fall to just around 1% in 2022.