- Coronavirus vaccine hopes
- Franco-German $545 Billion Pandemic Response
- Rising U.S-China Tension
EUR/USD bounce back after a bearish start to the week continues to gather momentum. Weakness in the dollar on the hopes of a potential Coronavirus vaccine is one of the catalysts fuelling an upswing in the pair. However, concerns over escalating tensions between the U.S and China threatens to fuel demand for safe-haven assets such as the U.S Dollar.
EU Stimulus Package
A strengthened dollar is the last thing that EUR/USD bulls need, especially on the pair pulling lower from one-month highs late last week.
Weak economic data has so far been the biggest undoing to the EUR, which has continued to weaken against the dollar in recent weeks. The fiscal response by the European Central Bank has so far been weak compared to that by the Federal Reserve, one of the reasons why the EUR/USD pair has continued to edge lower. Infighting among EU countries over policy measures has also had a negative impact on the EUR sentiments in the market.
However, a Franco-German effort over the past week appears to have revitalized investor sentiments on the EUR, conversely sending the EUR/USD pair to one month, although it has retracted in recent trading session. German and France have agreed to a $545 billion pandemic response expected to bolster the EU economy.
Standing in the way of the EUR/USD pair rising past the one-month highs of $1.1000 is raising tensions between the U.S and China. The two superpowers are entangled in a bitter standoff over Beijing push to implement a controversial security law over Hong Kong.
The dollar edged higher, as a safe haven, in Monday trading session in response to rising tensions between the two nations. The Chinese Foreign Minister Wang Yi reiterating that the U.S was risking a new cold war should continue to fuel tensions in the forex market that could see traders flocking safe havens such as the dollar. A strengthened greenback should continue to take a toll on the EUR/USD exchange rate.