The Euro Powers On, Merkel Threatens to Lockdown Berlin for 10 weeks
Remarkably, the Euro—even with threats by Angela Merkel to lock Germany for a further 10 weeks if numbers don't improve, continues to steady versus the USD and other currencies. Germany re-introduced lockdowns in November 2020 as the number of coronavirus infections rose. However, more stringent measures have been introduced. The lockdown has been extended to April 2021, all but ensuring a recession probably in the first half of the year. Even with this, the Euro remains firmer, receiving support from the low demand of USD, record-low interest rates, the rally in the stock market, and confidence in the COVID-19 vaccines.
Germany remains on focus after the finalization of Brexit. As the coronavirus infection count resurges and rises in some countries in Europe, Germany is becoming stricter, re-introducing lockdown to contain its spread. Still, the Euro remains firmer but likely to crumble if there is an extension of Germany's lockdown beyond April. Analysts are now tracking the EUR/USD, a barometer to check whether the Euro will finally crack following hints of USD demand from the debt market driven by attractive bond yields.
Impact on the Euro:
Neutral to bearish. Coronavirus remains in focus as politics is temporarily set aside. If numbers rise, Germany may institute more measures harming the economy and the single currency in the medium term, subsequently cooling off the hot Euro.
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