Rolled Euro banknotes are placed on US dollar banknotes in this illustration taken on May 26, 2020. REUTERS / Dado Ruvic / Illustration

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London, November 22 (Reuters) – The euro approached its lowest level in 16 months on Monday as concerns grew over new COVID-19 restrictions in Europe, with Austria entering a new full lockdown and l Germany planning to follow suit.

Acting German Chancellor Angela Merkel told leaders of her Conservative Party that measures taken to stop the spread of the coronavirus in Europe’s largest economy were insufficient and that stronger action was needed. Read more

Meanwhile, Austria has entered its fourth lockdown, the first since vaccines became widely available, closing Christmas markets, bars, cafes and theaters. Read more

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The euro slipped 0.2% to $ 1.1275 at 1:00 p.m. GMT, near a 16-month low hit on Friday when Austria announced the lockdown.

“The EUR / USD outlook appears to be one of those rare occasions when everything is aligned against the euro,” Kit Juckes, head of currency strategy at Societe Generale in London, told clients.

“COVID-19 is a bigger problem in Europe than anywhere else,” he said, adding that it was not the only factor. The Chinese slowdown and global supply chain problems are hurting Europe more than the United States, while expectations that the Federal Reserve will raise rates have supported the dollar, he said.

The new lockdowns and pressure on the service sector in Europe now provide the European Central Bank with many more reasons to slow down policy tightening, ING said in a note.

US dollar borrowing costs in FX derivatives markets hit their highest levels in nearly a year.

Three-month currency swaps against the Euro-dollar fell to their lowest level since December 2020, according to data from Refinitiv, suggesting increased demand for the greenback. L8N2SD31D

The dollar received further support from bullish comments on Friday from Federal Reserve officials Richard Clarida and Christopher Waller, who suggested that a faster pace of stimulus reduction may be appropriate amid an accelerating recovery. and high inflation. Read more

The Dollar Index, which values ​​the currency against six major peers, traded little at 96.131, staying within sight of last week’s high of 96.266.

An earlier end to tapering also raised the possibility of earlier interest rate hikes.

Minutes from the Federal Open Market Committee meeting earlier this month, when policymakers announced a start of the cut, are due Wednesday. They can provide more information on how many Fed officials are considering a faster cut or earlier rate hikes.

US President Joe Biden is also expected to announce his Fed presidential candidate this week, after making the decision to retain outgoing President Jerome Powell or to elevate Fed Governor Lael Brainard to that post.

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Reporting by Joice Alves, additional reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa, Philippa Fletcher, Chizu Nomiyama and Alexander Smith

Our Standards: Thomson Reuters Trust Principles.


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