EURUSD Lowest in Six Weeks, European Markets Little Changed
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- Joe Biden’s inauguration to take place on Wednesday
- A time of transitions on the European political front
Monday morning brings little changes to the market as European traders enter trading. The currency market remains stable and European stocks point to modest losses at the opening of the trading session. EURUSD stays unchanged near last week’s close around 1.2070, its lowest point since Dec 10, six-week span. For January, the dollar has been showing signs of continued strengthening across the board with market participants still applying pressure on the EURUSD as Joe Biden is getting ready to enter the White House on Wednesday.
Since the opening of the Asian session, the EURUSD has remained depressed, starting from an opening price of 1.2083, and currently trading relatively unchanged. Today, the pair is not looking into any major news coming from the US because the stock and bond markets will be closed in observance of Martin Luther King, Jr. Day. US traders take a short break but remain on edge over the rising Covid-19 cases, the slow vaccine roll-out, and the upcoming inauguration of President-elect Joe Biden.
ECB Focuses on Economic Recovery
On the European front, the European political front is getting heated as governments transition. Italian Prime Minister Giuseppe Conte will face a confidence vote in the lower house on Monday and a Senate vote on Tuesday. The move comes as a result of the resignation of former prime minister Matteo Renzi, following critiques over the handling of the pandemic.
Germany’s ruling party has found a new leader to replace Angela Merkel. As of this weekend, Armin Laschet is the new leader of the Christian Democratic Union, Germany’s ruling party, and the political home of Angela Merkel, who has been the country’s Chancellor for 16 years. Mr. Laschet is closely linked with Ms. Merkel. Some of the members of his party view him as too liberal, but Mr. Laschet has presented himself as the only candidate who can keep all of the party’s competing camps together.
An important factor later in the week that can also influence EURUSD’s price behavior is the upcoming ECB meeting on Thursday. The central bank will hold its first rate-setting meeting of 2021 with a focus on economic recovery amid ongoing lockdowns and an improving vaccination rate across Europe. While the ECB is expected to keep interest rates unchanged, ECB President Christine Lagarde has indicated readiness to expand ECB’s main bond-buying program further if needed, depending on the vaccination progress and the lockdown impact on the eurozone economy.
Restrictions in most European countries are already indicating a slowdown in economic activity. The new surge in infections that has been dragging on for longer, compared to the deep shock experienced in the first wave, has led to harsher restrictions in the European countries with the strongest economies. Germany is now under tougher lockdown measures than in the first phase of the pandemic. Even though Italy recently surpassed 1 million vaccinations, Prime Minister Conte signed a new emergency decree with new Covid-19 restrictions that will remain in place until Mar 5. Under the decree, Milan and the surrounding Lombardy region became a “red zone” on Sunday. The Netherlands also implemented new and stricter measures, which led several thousands to protest in Amsterdam.
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