• Karry James

Europe's Grip on COVID Outbreak Gives Euro Edge Over Dollar, Experts Say



The euro rose to more than one-month highs against the dollar on Tuesday, and may likely heap further misery on the greenback as Europe appears to have a better handle on containing the coronavirus outbreak than the U.S. does, setting it up for a faster recovery.

The spread of the virus across major European countries is more contained even after recent lockdown measures were lifted, while in the U.S., some states are rolling back reopening measures.

This is creating the "potential for cyclical momentum to diverge in the near-term between the U.S. and eurozone economies," MUFG currency analyst Lee Hardman said. "If the eurozone recovery is allowed to continue without re-imposing lockdown measures, it could boost the relative attractiveness of the euro over the U.S. dollar."

Expectations are already running high that the eurozone is set for a solid economic recovery.

Bank of America (NYSE: BAC) said that investors should position themselves for PMI upside in the eurozone, forecasting the composite PMI for new orders to rise from 47 in June to 58 by September.

The strong start to the week for the euro comes ahead of the European Central Bank's meeting and the European Summit later this week.

The ECB meeting, however, will likely be a non-event as no policy changes are expected. "The meeting should be more about testing [ECB] President Christine Lagarde's communication skills rather than any new measures," ING said.

In its previous meeting last month, the central bank expanded its coronavirus bond-buying program and kept its benchmark rate on hold.

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