GBP/USD: Dollar vs. Pound Awaits Fed Chair Powell's Appearance Before Congress
  • Euro (EUR) charges higher despite rising covid cases
  • Euro PMIs in focus, service sector weakness expected
  • US Dollar (USD) lower on safe haven outflows
  • FOMC in focus no changes expected

The Euro US Dollar (EUR/USD) exchange rate is advancing on Wednesday for the third straight session. The pair settled 0.1% higher in the previous session at $1.2151, 15 pips off the high of the day.  At 07:15 UTC, EUR/USD trades +0.4% at US$1.2206 a fresh year to date high.

Despite rising covid cases and tighter lockdown restrictions in several Eurozone countries such as Germany and the Netherlands, the Euro is managing to push higher. With several covid vaccines expected to be approved in the coming weeks, investors have are shrugging off near term covid fears.

December’s preliminary PMI data for the region is due to be released. Analysts are expecting the manufacturing sector to show resilience despite the lockdown. However, the service sector is expected to remain deep in contraction, the sector most affected by social distancing and lockdown restrictions.

The US Dollar was under pressure in the previous session and continues to weaken as vaccine optimism and additional stimulus hopes overshadowed soaring covid infections and tighter lockdown restrictions.

Investors are growing increasingly confident that Democrats and Republican lawmakers will reach an agreement over a $748 billion bipartisan proposal. Whilst this is smaller than the initial $1 trillion proposals from several months ago, it would be a direct injection of cash into the economy which is desperately needed right now. Previously agreed benefits are due to expire at the end of the year.

On the data front US industrial production rose 0.4% in November month on month, ahead of 0.3% forecast but down from October’s 0.9% as the sector remains resilient despite resurging covid.

Today investors will be looking out for further developments in stimulus talks and at the Fed interest rate decision. The Fed are not expected to ease monetary policy instead are likely to sit on the sideline waiting for further developments surrounding the covid vaccine rollout and stimulus news.