- Euro (EUR) drops for a third session
- Germany & France are mulling over national lockdowns to control the spread of covid
- US Dollar (USD) rises on safe haven flows amid surging covid cases
- US elections are also causing jitters
The Euro US Dollar (EUR/USD) exchange rate is extending losses for a third straight session on Wednesday. The pair settled on Tuesday -0.1% blow the key US$1.18 psychological support at US$1.1795, at the lower end of the daily traded range. At 07:15 UTC, EUR/USD trades -0.3% at US$1.1754.
The Euro is slumping on reports that France is considering a month-long national lockdown to combat surging covid cases. With new daily cases topping 33,000 the government has been warned that a national lockdown is the only way to tackle the problem. French President Macron could impose a lockdown from Thursday, although it would be a slightly more flexible version than the two-month shut down in mid-March.
In Germany, Chancellor Angela Merkel is wanting state premiers to agree to closing all restaurants and bars from November 4th to curb covid infections but to keep schools and nurseries open.
Governments have been keen to avoid a second lockdown after the lockdown earlier in the year hit economic growth hard.
Attention will now turn to tomorrow’s European Central Bank meeting. The latest developments will up the pressure on the ECB to deliver more stimulus to support the bloc’s fragile economy. Whilst it is probably still too early to see any further action from the ECB this month, there is a very good chance that the central bank will tee up the market for further asset purchases in December.
The US Dollar is advancing on safe haven inflows as investors seek out the protection of the US Dollar’s safe haven properties whilst shunning riskier currencies. Jitters from rising covid cases in both Europe and the US and the impact that tighter lockdown restrictions will have on the global economic recovery is prompting risk aversion.
US elections jitters are also adding to the risk off mood. Whilst the national polls show that Joe Biden has the lead, investors fear that the same polls failed to predict Trump’s victory in 2016.