euro-bank-notes - EUR
  • Euro (EUR) slumps as more infectious covid unnerves investors
  • Eurozone consumer confidence in focus
  • Investors seek US Dollar (USD) safe haven properties
  • US Congress agree on $900 billion stimulus programme

The Euro US Dollar (EUR/USD) exchange rate is opening the week on the back foot, extending losses from Friday. The pair closed -0.1% lower on Friday at US$1.2255. However, across the week the pair rallied 1.2%. At 09:15 UTC, EUR/USD trades -0.6% at US$1.2174 at the low of the day.

Risk off trading is driving the Euro lower, whilst boosting demand for the safe haven US Dollar as fears over a rapidly transmitting strain of covid hit the market, overshadowing news of US lawmakers agreeing a covid fiscal stimulus package.

A new strain of covid which is 70% more infectious is spreading across the UK raising fears of more severe lockdowns measures. Several European countries have closed their borders with the UK.

The Euro managed to push higher in the previous week even as covid cases rise sharply, lockdown restrictions were tightened and macro data was broadly unimpressive. Whilst the manufacturing and service sector PMIs bear forecasts, the service sector remained in contraction. Industrial production also declined sharply whilst inflation remained stuck in negative territory.

Looking ahead Eurozone consumer confidence data will be in focus. Analysts are expecting sentiment to remain in line with November at -17.6, as investors weight up the near term impact of the resurgence in covid with the longer term outlook of the vaccine.

The US Dollar is risong as investors seek out its safe haven properties. The risk off mood is reflected in both European equities which are trading sharply lower and US futures which are also trading in the red.

Covid fears are overshadowing news that US Congress has agreed as covid rescue bill. The House and the Senate are due to vote on the $900 billion pandemic relief bill today; a bill which will be the second largest rescue package in the history on the US. Both chambers are expected to pass the bill easily.