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04 Jan 2021
3 min read

EUR/USD Holds Above 1.2250, European Markets Open Higher

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Written by OspreyFX News Team

EUR/USD Holds Above 1.2250, European Markets Open Higher

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Key Takeaways
  • The Euro remains resilient despite current events
  • Covid-19 continues to increase restrictions in Europe

The EUR/USD exchange rate has gained over 9.30% in 2020, making it one of the biggest winners in the currency markets. The pair started trading in 2020 below 1.1200 and ended the year at a closing price of 1.2214 with a high of 1.2310 reached on Dec 30. The rally in the EUR/USD remains strong as the Euro is not giving up the gains in the early hours of the European session on the first trading day of 2021.

At present, the Euro is hovering over 1.2250 against the US dollar as European markets open modestly higher after their close in negative territory on Dec 31. The strong Euro proves to be resilient despite these trying times that are forcing more European countries to extend lockdowns in the midst of surging Covid numbers. Germany announced that it will most likely prolong the nationwide lockdown throughout January as the country registered a seven-day infection rate of more than 140 cases per 100,000 people. Chancellor Merkel will meet with policymakers on Tuesday to discuss the extension of current restrictions, which is set to expire on January 10. The UK has also experienced a strong surge of cases with a seven-day rate of nearly 400 cases per 100,000 people. In this light, Prime Minister Boris Johnson is considering to keep the UK under lockdown and even impose harsher restrictions. France has also seen an alarming 7-day average rate of Covid infections in January 2021 so far. Indeed, the country has registered 12,489 new cases on Jan 3, marking a 7-day average of 13,720. As a result, the French government brought forward the night-time curfew from 8 pm to 6 pm in 15 departments.

While the rollout of the coronavirus vaccine was announced earlier in December, European countries have been facing difficulties in their attempts to distribute and administer the vaccine. The UK has been able to administer roughly 1 million doses. Germany stands at 238,000 and France has managed only 350.

Optimism Reigns Across the Markets

Elsewhere in the markets, the week and the year starts with a continued optimism across assets. The Great British pound remains well bid in the first trading day of 2021 as the GBPUSD marked a new high earlier today going above the top for 2020 and briefly peaking over 1.3700. Brexit is still ongoing only now the negotiations have been replaced by easing the paperwork hassles between the EU and the UK.

Market participants keep their hopes high for US stocks as US futures point to a higher open on Wall Street while European indexes are already in positive territory, trading strongly to the upside. Investors seem confident that the rally in stocks will continue in 2021 as we already have a coronavirus vaccine and the US demonstrated a powerful economic comeback by approving two coronavirus relief packages for 2020 with more to come under the Biden administration in 2021. The quick recovery following the March meltdown largely known as “the everything rally” continues to raise the expectations of market participants that 2021 will fuel even more gains.

Looking at some of the figures, the S&P500 closed the year higher by 68% from its March lows, or over 16% gain for 2020. US oil is up over 222% for the period March-Dec 2020 but still closed the year down by 22%. Gold is up roughly 30% since the pandemic lows in March or a 24% gain for the year.