It looks like the most important fundamental EUR/USD factor is starting to work in favour of the American dollar. Measuring since July 1, 2021, the balance sheet expansion of the European Central Bank (orange line) has grown by 5.0%. At the same time the FED assets (blue line) grew 4.6%.
The analysis of the historical data shows that the EUR/USD exchange rate has a tendency to fall when both currencies are printed at the same pace. In case the ECB prints faster than Fed, we may expect the pair to fall more dynamically than since the beginning of 2021.
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| Fed/ECB balance sheet expansion (July1 - October 7, 2021) |
Data credits:
Board of Governors of the Federal Reserve System (US), Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level [WALCL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WALCL, October 7, 2021.
European Central Bank, Central Bank Assets for Euro Area (11-19 Countries) [ECBASSETSW], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ECBASSETSW, October 7, 2021.