EUR/USD has jumped as much as 200 pips in just over a week of trading. It comes following the bulls breaking out of a critical range that had contained the price. A long period of consolidation was observed from late July up to the start of November.
Now let’s take a look at some key points that is and will largely influence EUR/USD moving forwards...
Eurozone steps ahead
Covid cases were aggressively spiking higher through the Eurozone, which forced several key economies within the block to take much needed action and go back into lockdown. It was a case of short-term pain again in terms of less economic output, however better now to prevent further damage to help chances of a recovery down the line. Whereas in the U.S. cases are still rising and the country is not in any strict lockdown, which will harm the economy more greatly down the line. This gives EUR the edge firmly over USD.
As a result of the economic damage occurring to the U.S., it will force the central bank (FOMC) for greater action (stimulus) and it means interest rates will be lower for longer. There is growing expectation that they will announce a boost to their QE program, in December. (USD negative).
Once Biden takes his seat as the U.S. President, expectations are he will announce more strict lockdown measures across the country. These are of course near-term will harm economic output and in comparison to other nations again put the U.S. on the back foot. There will be further reason to see outflows from the world's reserve currency.
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