Home EUR/USD: Renewed lockdown fears weigh on the euro – MUFG
FXStreet News

EUR/USD: Renewed lockdown fears weigh on the euro – MUFG

The euro has underperformed undermined by renewed fears over lockdowns in Europe as the region is seeing a sharp acceleration in coronavirus cases. It has helped drag EUR/USD back below the 1.1800-level and EUR/JPY below the 123.00-level. These disruptions from the second COVID-19 wave in Europe is set to build a darkening outlook for the common currency, per MUFG Bank.

Key quotes

“The main trigger for the euro sell off has been reports that the French government is considering a month-long national lockdown to help dampen the spread of COVID-19 which could take effect from midnight on Thursday. French President Emmanuel Macron is expected to make a televised address on Wednesday when the new lockdown measures could be officially announced.” 

“According to the WHO, 46% of all global cases and nearly one third of all deaths were from the European region last week. If the negative COVID-19 trends in Europe continue in the coming weeks and months, it will increase pressure on other national governments to follow France and re-impose lockdown measures. The developments are clearly darkening the outlook for the economic recovery in Europe heading into year end. Leading indicators are already signalling that the eurozone economy is slowing more than the US which is currently experiencing its third wave of COVID-19.” 

“Softening growth expectations are also reflected in the latest ETF flow data. We have looked at five of the biggest euro-zone equity ETFs. There has already been a clear pick up in outflows from those funds over the past month which has reversed around half of the inflows which took place between July and August. The sharp reversal in eurozone equity flows provides a less supportive environment for the euro.” 

“At the same time, the ECB and national governments will come under increasing pressure to deliver further stimulus to support growth, although it is probably too soon to expect action as soon as at this week’s ECB policy meeting.”

 

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.