Today, the European Union is set to unveil new rules that govern how much of its Covid-19 vaccine is exported. The goal is to help the continent ramp up its own vaccination drive, which is somewhat ironic considering that the EU is one of the world’s largest producers of the Covid-19 vaccine.
The bloc’s vaccination rollout far lags behind other major peers. According to Bloomberg data, here’s how the EU fares against the US and the UK in administering at least one dose of the Covid-19 vaccine:
- EU: 9.1% of its population
- US: 25.3% of its population
- UK: 42.4% of its population
At the current rate, the US needs just 5 more months to vaccinate 75% of its population. The UK is set to accomplish the same within 4 months.
The EU however would need 17 months before 75% of its population receives the Covid-19 vaccine.
Vaccination lag, lockdowns weigh on euro
Investors are cognizant of the rationale that economic conditions can take bigger strides towards pre-pandemic levels once enough of the population has the vaccine. The vaccine would inject the local population with more confidence to eat out, travel, and just return closer to life overall as it once was. The slower vaccination rollout suggests that the EU economy would need a longer time to recover and lag behind other major economies.
The lockdowns and other virus-curbing measures that are still in place in major European economies are adding to the currency’s woes. Germany has announced a 5-day lockdown over Easter, while parts of France and Italy have also reimposed tighter restrictions for a month.
Economic data may offer little saving grace for euro’s near-term prospects
Also today, investors will be monitoring the Eurozone’s preliminary PMI readings for March. Although conditions in the manufacturing sector are set to keep expanding and recovering, which is PMI reading above the 50 mark, the services sector is set to continue languishing in contractionary territory.
Barring a positive surprise in the data, the bloc’s currency is unlikely to find much solace in the economic prints to be released today.
Such dampened economic prospects are not lost on euro traders. No surprise then that the euro has a year-to-date decline against most of its G10 peers:
While greater access to Covid-19 vaccines could alleviate some of the immediate selling pressure on the euro, more positive news is needed to restore the optimism surrounding the shared currency.
EURUSD woes to continue following ‘death cross’
From a technical perspective, it is also difficult to argue for euro strength over the near-term.
EURUSD’s 50-day simple moving average (SMA) has now crossed below its 100-day counterpart. Exactly a week ago, its 30 SMA had crossed below the 100 SMA, forming a ‘death cross’ – a technical event which indicates that more pain for the bloc’s currency could be on its way.
With spot prices on the world’s most-traded currency pair also testing its 200-day SMA and threatening to set a new 2021 low, a significant break below this key support level around 1.184 could mark 1.1750 as the next port of call for Euro bears. Note that the 1.1750 region was also the lower bound for the currency pair’s trading range back in August.
With momentum still pointing south, coupled with the fact that its 14-day relative strength index has yet to hit the 30 line which is the threshold for oversold territory, it suggests that the Euro has more downside to explore over the immediate term.
As for the euro index, which is an equally-weighted index comparing the euro's performance versus the:
... its downward trend also appears firmly intact, with this index having the tendency to hug the lower bound of its Bollinger band for much of this year.
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