The Euro fell sharply on Tuesday against the US Dollar as new lockdown restrictions in Europe weighed on the single currency. The EURUSD gave up 0.70 percent, down to 1.1851, its lowest level in three weeks.
The day before, the single currency had progressed against the buck, but the Euro “remains close to its lowest of the year because of the slow deployment of the vaccination program,” commented Stephen Innes, an analyst at Axi.
Chancellor Angela Merkel's announcement Tuesday morning that Germany would be placed on heightened lockdown from April 1 to 5 over the Easter weekend “absolutely contributed” to the euro's weakening, said Brad Bechtel of Jefferies.
“When we woke up this morning, it was the biggest news,” while earlier in Asia the U.S. dollar had already been favored by investors, the analyst added.
A third of French people, including the 12 million in the Paris region, is also confined again since Saturday.
The markets were also attentive to the hearing of the Fed boss Jerome Powell before a congressional committee, where he reiterated that the Central Bank would continue to support the economy with its accommodating monetary policy.
Market fears of a return of inflation due to the economic recovery and the giant stimulus package in the U.S. have pushed up rates in the bond market, which has led to a strengthening of the dollar.
Some investors are hoping that the Fed will open the door to tightening monetary policy sooner than expected. But for now, Powell is focusing on the need to get the economy moving again.
(Chart Source: Tradingview 23.03.2021)
In the longer term, “the Fed's explosive moves should reduce the dollar's outperformance because they will also allow the rest of the global economy to recover,” says Kit Juckes, an analyst at Societe Generale.
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