EUR/USD: Surging covid cases and US elections uncertainty open the room to the downside

EUR/USD remains under pressure below 1.17 after the European Central Bank (ECB) expressed concern about the impact of the virus on the economy. The worrying covid situation and uncertainty about the US elections are set to weigh on the pair, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“France has reported a leap of 18.2% in the third quarter, better than estimated and the best on record. However, the recovery from the depths of the first coronavirus wave is already making way to the second coming of the virus. EUR/USD's recovery is set to resume its falls.”

“The upbeat French Gross Domestic Product figures imply better than projected eurozone data, yet markets are focused on October and November rather than the three months ending in September. Inflation – which Lagarde says will likely remain negative until early 2021 – is forecast to hover around 0% in October.”

“Christine Lagarde, President of the ECB, warned that a double-dip recession – a return to contraction in the current quarter cannot be ruled out. The Frankfurt-based institution left its policy unchanged but laid the ground for acting in December when staff releases new economic forecasts. Her words came just after the eurozone's largest countries announced new measures to curb the surge of the disease, something that is set to halt the recovery.”

“Markets are also concerned about US COVID-19 cases, which have hit a new high above 83,000. The disease is most prevalent in the colder Upper Midwest states – some of the critical battlegrounds in the upcoming elections. Over 82 million Americans have voted – nearly 60% of the 2016 vote count.” 

“Thursday's flurry of opinion polls did little to change the picture – Democrat challenger Joe Biden has a considerable lead in national polls and a significant one in key states. Nevertheless, both camps – and markets – foresee a tighter race. Moreover, investors fear a close race could lead to a contested election. The US dollar benefits from safe-haven flow amid growing fear. Additional opinion polls are set to move markets. Traders may want to take risk off the table ahead of the Halloween weekend.”