LONDON: The euro fell on Monday to trade close to a 16-month low on growing concerns over the impact of new COVID-19 restrictions in Europe, with Austria starting a full lockdown and Germany considering following suit.
Germany’s acting Chancellor Angela Merkel told leaders of her conservative party that measures being taken to stop the spread of the coronavirus in Europe’s biggest economy were insufficient and that stronger action was needed.
Meanwhile Austria began its fourth lockdown, the first introduced since vaccines became widely available, shutting Christmas markets, bars, cafes and theatres.
The euro slipped 0.2% to $1.1275 at 1300 GMT, close to a 16-month low touched on Friday when Austria announced the lockdown.
“The EUR/USD outlook feels like one of those rare occasions when everything is aligned against the euro,” Kit Juckes, head of FX strategy at Societe Generale in London, told clients.
“COVID-19 is a bigger problem in Europe than anywhere else,” he said, but that was not the only factor. The Chinese slowdown and global supply chain issues are hurting Europe more than the US, while expectations that the Federal Reserve will raise rates supported the dollar, Juckes added.
New lockdowns and pressure on the service sector in Europe now provide the European Central Bank with many more reasons to go slow on tightening its policy, ING said in a note.
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