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  • EUR/USD has slipped back towards 1.2230 from daily session highs around 1.2250 in recent trade as DXY bounced as 90.00.
  • No catalysts have triggered the move; euro traders remain focused on pandemic and Brexit updates.

Compared to Monday’s Asia Pacific and European morning sessions, recent price action has been comparatively tame. Having swung as low as 1.2128 on Monday on a mixture of risk-off/USD strength, EUR/USD has spent most of the day recovering back towards last Friday’s closing levels around 1.2250, but in recent trade dropped back about 20 pips over the past hour or so from around 1.2250 to towards 1.2230.

No specific fundamental catalysts have triggered the move, which is seemingly in sync with some USD bulls coming in to keep the Dollar Index (DXY) supported above the psychological 90.00 level. As the 22:00GMT Monday FX close approaches, EUR/USD trades with losses of about 0.2% or 20 pips on the day.

EUR traders focused on major market themes…

Eurozone domestic fundamentals have been at the back of every euro trader’s mind on Monday; preliminary December Eurozone Consumer Confidence numbers were released at 15:00GMT and made for somewhat optimistic reading, with the index rising to -13.9 from -17.6 in November versus expectations for a much more measured rise to -16.8. That means consumer confidence is back at levels last seen in September, prior to the Covid-19 “second wave” that forced much of the continent back into lockdown in October and November. This improvement comes despite recent economic restriction being imposed in Germany and other key Eurozone economies to tackle the spread of Covid-19.

But data doesn’t particularly matter to the market right now (and hasn’t for some time); what does it matter if there was a slight improvement in Eurozone consumer confidence in December if the continent is about to walloped by a new strain of Covid-19, seemingly originating in the UK, that spread much faster and thus has the potential to wreak much more economic and health damage. Cases of this new variant are already being picked up in Italy, Denmark and the Netherlands, so it may be too late to stop an outbreak on the mainland. Indeed, this theme was the main focus of Asia Pacific and European morning trade, hence the risk off/USD strength moves seen at the time.

However, focus turned to US factors (as expected) during US hours, however, where the news has been much more positive; 1) Congress is on the cusp of ratifying a $900B stimulus package that includes $600 in direct payments to all adult American citizens and US President Donald Trump could sign off on the package tonight. 2) Banks stocks soured after the Fed unexpectedly greenlit a resumption of share buybacks in Q1. 3) UK PM Boris Johnson is reportedly pushing for an 11th-hour deal with the EU with a new offer on fisheries.

Thus, EUR/USD traders, much more focused on the above macro themes, were back on the bid for much of the last few hours. Amid a lack of any further important Eurozone data releases this week and with US stimulus practically a done deal at this point, euro traders will spend the rest of the week focused on Brexit and pandemic updates. It is worth remembering that conditions are thin with many European and American market participants now on Christmas holidays. Rollercoaster price action is likely to continue.