GBP/EUR: Will ECB Minutes Boost Euro vs. Pound?
  • Euro (EUR) out of favour on risk flows
  • John & Johnson pause covid vaccine trial over an unexplained illness
  • US Dollar (USD) rises as vaccine news & US Congress’ inability to agree stimulus boosts safe haven demand
  • US CPI data to show inflation growth slowing

The Euro US Dollar (EUR/USD) exchange rate is extending losses on Tuesday for a second straight day. The pair settled mildly weaker on Monday -0.02% at US$1.1813. At 07:15 UTC, EUR/USD trades -0.2% at US$1.1786.

A risk off mood in the market is dragging on the Euro whilst boosting the safe haven US Dollar. News that Johnson & Johnson has paused its vaccine rial owing to an unexplained illness is unnerving investors. Johnson & Johnson’s covid vaccine is one of the lead contenders. The data will now be reviewed by an independent safety board. At best this could be a pause of a week or so, like the AstraZeneca pause. At worst this could be much more serious throwing the programme into doubt.

Rising covid cases in the old continent is also dragging on demand for the Euro. Spain, France and Italy are ready to tighten restrictions further to prevent the spread off the virus.

German inflation data was inline with expectations. Consumer prices fell in September confirming preliminary data. Inflation declined -0.2% on the year in August. Attention will now turn to German ZEW sentiment data which is expected to show a slight deterioration in sentiment.

The US Dollar is rising on safe haven flows in risk off trade brought about by the disappointing vaccine news in addition to the continued failure of US Congress to agree on a covid stimulus package.

The Democrats and Republicans are still failing to see eye to eye. With just three weeks to go until the US Presidential elections there is a growing sense that a deal won’t be agreed until after November 3rd.

Looking ahead, investors will focus on US inflation data for further clues over the health of the US economy. Consumer prices are expected to increase +0.2% month on month in September, down from 0.4%.