EUR/USD has been under pressure as coronavirus cases are surging in Europe and the US while fiscal stimulus talks seem closer to collapse. Uncertainty about the elections also boosts the safe-haven dollar, Yohay Elam, an Analyst at FXStreet, reports.
Key quotes
“Coronavirus is raging in the old continent and weighing on the euro, pushing it off the highs. France has reported a daily record of cases on Saturday – only to surpass it on Sunday and reach 52,000. Per population, Belgium and the Netherlands are doing worse than their southern neighbor. Governments are also taking action. Spanish Prime Minister Pedro Sánchez addressed the nation and declared a new state of emergency that he wishes to extend until May while Italy is preparing additional limitations that would help curb the disease – and also risk the economic recovery.”
“While the increase in Europe’s spread of the disease is weighing on the euro, the increase in the US is boosting the safe-haven dollar. The world’s largest economy reported daily records of above 80,000 cases, pushing its seven-day moving average higher.”
“Another factor for the flight to the safe-haven dollar is the probable breakdown of fiscal stimulus talks. House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows were busy pointing the figure at each other over the weekend. With so little time until the elections, a deal always had little chances – but now markets seem to come to grips with it. Moreover, Senate Republicans are focused on confirming Amy Coney Barret to the Supreme Court and remain skeptical about the need for further stimulus.”
“The upcoming US elections are also a cause for uncertainty and dollar demand. Challenger Joe Biden continues leading President Donald Trump, and Democrats have a chance of flipping the Senate. Investors favor such a ‘blue wave’ that would enable passing a generous stimulus package. However, there have been few opinion polls since the last presidential debate, and speculation remains rife.”
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