EUR/USD: New covid strain is far from being a British problem, euro set dive

EUR/USD has tumbled amid fears of a new coronavirus variant. Fears of the strain's spread in Europe are set to overcome the US stimulus deal and other upbeat developments, Yohay Elam, an Analyst at FXStreet, reports. 

Key quotes

“The new COVID-19 strain that has been identified in the UK is causing panic – most European countries have reacted swiftly with bans on travel to and from the UK. It is likely that the strain is circulating in Europe. Once laboratories identify it elsewhere, it could weigh on the euro as well.”

“The good news for the common currency is that the level of panic may be exaggerated. It is unclear if the new covid strain is the sole culprit of London's quick transmission. Residents in the dense capital are suffering from pandemic fatigue and have been busy doing Christmas shopping.”

“Democrats and Republicans finally struck a fiscal relief deal worth $900 billion. It does include the thorny issues of state aid or liability waivers – nor a last-minute attempt by the GOP to curb the Federal Reserve's lending powers. The move came after a long weekend of talks and is now in the final drafting phase. The upbeat development is liming the market downfall.” 

“There is more room to the downside once the strain of the virus is widespread in the eurozone – but perhaps followed by a more significant recovery later on. In the short run, EUR/USD attempts at recapturing 1.22 look like a ‘dead-cat bounce’ – a small rise followed by another dive.”