- Euro (EUR) trades lower after France recorded a record number of covid cases & tighter restrictions
- Friday’s PMIs highlighted business activity contracting in October
- US Dollar (USD) rises on safe haven flows
- US sees record covid cases & US stimulus talks remain deadlocked
The Euro US Dollar (EUR/USD) exchange rate is under pressure on Monday, paring some gains from the previous week. The pair rallied +1.3% across the previous week, closing on Friday at US$1.1859 at the high of the week. At 07:15 UTC, GBP/EUR trades -0.3% at US$1.1820, after pushing as high as US$1.1861 in the Asian session.
The Euro is trading on the back foot across the board at the start of the new week as coronavirus infections in the old continent surge. France recorded its largest single day increase in coronavirus cases, meanwhile Spain has announced a national curfew and Germany has seen new cases rise by 8,675 slightly down from a record surge of 11,176 new daily infections reported on Sunday.
With new daily cases soaring and lockdown measures tightening, concerns are growing that the fragile economic recovery will quickly be derailed and a double dip recession could be on the cards. Friday’s PIM data revealed that business activity s already back in contraction mode.
The European Central Bank is due to meet later this week to take its monetary policy decision. The markets are expecting the central bank to increase the pandemic bond buying programme by €400 billion before the end of the year, in December. However, as more nations increase economically painful lockdown restrictions to stem the spread of covid, investors may expect even more support from the ECB.
The US Dollar is pushing higher on safe haven flows. Whilst covid cases are on the rise in Europe, they are also surging in the US. This coupled with fresh doubts over a new US stimulus package is prompting investors to turn to the US Dollar for its safe haven properties.
There are few signs that a US fiscal stimulus package will be agreed before the US Presidential elections next week, with both the House Speak Nancy Pelosi and White House Chief of Staff Mark Meadows accusing each other of moving goal posts.