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

FXStreet reports that disruptions from the second COVID-19 wave in Europe is set to build a darkening outlook for the common currency, per MUFG Bank.

“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 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.” 

“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.”