Euro Risks Fall Below $1.18 as Third Covid Wave Hits EU, Experts Warn

By Yasin Ebrahim

Investing.com – The euro fell against the dollar Wednesday and could soon be staring down the barrel of a plunge below $1.18 as the third wave of Covid-19 threatens the outlook for the economic bloc.

fell 0.22% to $1.1823 and could continue its bearish trend as the U.S. appears on track for a stronger recovery thanks to a speedy vaccine rollout, while the EU finds itself in the midst of lockdowns. There was some reprieve on the lockdown front for Germany, Europe’s economic engine, as Chancellor Angela Merkel today scrapped plans for harsher Easter lockdown amid widespread criticism. 

“The current uncertainty about the third wave … increases the risk that EUR-USD slips below 1.18,” Commerzbank (DE:) said in a note.

Economic data, meanwhile, is likely to play second fiddle to the ongoing pandemic dynamic as many expect economic steps in either direction are unlikely to spark the European Central bank into action.

“[W]ith the third Covid wave, the data are likely to continue to look lukewarm for the time being, especially compared to the USA,” Commerzbank added. “The data publications have become less relevant recently as they do not lead to a decisive decision on the part of the ECB.”

The bank’s remarks were supported somewhat as the single currency shrugged off economic data showing better-expected manufacturing output in the bloc.

Data on Wednesday showed stronger manufacturing activity for March. The index for manufacturing rose by 4.6 points to a reading of 62.4, while the index for services rose by 3.1 points to a reading of 48.8.

The euro is headed for its second straight slump against the greenback as traders have continued to trim their bullish bets, according to data from the Chicago Futures Trading Commission.

Speculative traders cut their net long positions in the euro by 12,000 to 90,000 for the week ended March 16.

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