- US Dollar (USD) rises on safe haven flows amid rising covid restriction fears
- Federal Reserve could ease monetary policy
- Euro (EUR) pressurised ahead of EU Summit of Leaders
- Budget, post covid response & Brexit to be discussed
The Euro US Dollar (EUR/USD) exchange rate is extending losses for a second straight session on Thursday. The pair settled -0.08% lower at US$1.1852 towards the low of the daily traded range. At 10:15 UTC, EUR/USD trades -0.2% at US$1.1829.
The US Dollar is pushing higher versus its major peers as recent optimism surrounding covid 19 vaccines starts to wane. Instead surging covid cases and fears of tighter lockdown restrictions are dragging on risk sentiment boosting demand for the safe haven US Dollar.
The number of covid deaths in the US hit 250,000 on Wednesday, with the number of people hospitalised at 78,000, the highest yet. The spread of the virus has prompted tighter restrictions in states such as Michigan, Washington and California. New York has also shut schools.
With tighter lockdown restrictions and little progress in the fiscal stimulus bill, there is a good chance that the Federal Reserve will step in again to ease policy in order to support the economy. Speculation is growing that the Fed will expand its assets buying in December.
The Eurozone isn’t in a good spot either. The region faces the risk of falling back into recession as a second wave of covid spreads across the old continent. Inflation, as measured by consumer prices is already falling which is a concern for the European Central Bank. The ECB already runs an ultra -accommodative policy. The ECB has room for more easing, a fiscal response is also needed.
At the EU Summit the leader will meet today and tomorrow. One of the key topics under discussion will be to agree a budget deal. So far Poland and Hungary are blocking the adoption of a post-covid recovery fund and long-term budget. French officials have reportedly said that the leaders could push ahead with the deal without Hungary and Poland.
ECB President Christine Lagarde is due to speak later today and US jobless claims will also be in focus.