EUR/USD: Tension toward the ECB prevents a greater fall

EUR/USD has been under pressure amid coronavirus concerns, which are dragging the pair to fresh lows in the mid-1.1700s. Speculation ahead of the ECB decision and US politics are eyed on Wednesday, Yohay Elam, an analyst at FXStreet, informs.

Key quotes

“The road to a coronavirus vaccine hit a road bump and that is adding to pressure on EUR/USD. AstraZeneca and the University of Oxford have halted their Phase 3 trial of a coronavirus candidate after one person fell ill after receiving the shot. While there are several other advanced immunization projects markets found another reason to worry. The safe-haven dollar is on the rise.” 

“The greenback's rise against the euro is more limited – and that can be attributed to tensions ahead of the ECB's decision on Thursday. The ECB is set to leave its policy unchanged but publishes new forecasts for growth and inflation. On one hand, the economy has suffered a less significant hit than previously estimated. On the other hand, coronavirus cases are rising – especially in Spain and in France – casting a shadow over the recovery.” 

“If the ECB comes and goes without rocking the boat, EUR/USD has more reasons to fall. Tensions between the UK and the EU are rising as Britain may push forward a bill that violated the Withdrawal Agreement, adding fuel to the fire of already deadlocked talks on future relations. While the pound is suffering the brunt of this breakdown in relations, the euro may also be affected.” 

“The greenback has more room to gain while Democrats and Republicans entrench themselves in their positions. The ruling party prefers a small relief bill – partially emboldened by the upbeat jobs report – while Democrats insist on providing a multi-trillion dollar package.”