U.S Dollar Propels With COVID-19 Staging A Big Comeback

In London on Monday, the dollar gained against the euro, remaining near 16-month highs. Investors also turned to the U.S. dollar as a safe-haven currency because of concerns over the growing number of COVID-19 cases in Europe.

The U.S. Dollar Index, which measures the value of the greenback against a basket of other currencies, rose 0.15% to 96.175 index points. The index was still nearly at a 16-month high struck the previous week of 96.266.

The U.S. currency also gained from bullish remarks from U.S. Federal Reserve officials.

The Federal Reserve’s Richard Clarida and Governor Christopher Waller suggested on Friday that accelerating asset tapering could be appropriate as the economy recovers and inflation rises. Early rate hikes are also possible as the economy recovers.

$1.127 was the euro’s price, down 0.23% at the early hours on Monday. As a result of growing restrictions and tensions across Europe, the EUR-USD has gained a lion’s share of attention from clients looking for a play.

In this environment, short EUR remains attractive for momentum and trend followers

With the prospect of an early Fed policy tightening, the US dollar was further strengthened by increased COVID-19 jitters.

Austria announced it would be the first country in Western Europe to impose a full lockdown amid an outbreak of infections, and Germany is expected to follow.

Moreover, this further enhanced the value of the greenback as a safe-haven currency and undermined the shared currency, which was also undermined by market expectations for tighter policy from the ECB.

A full lockdown in Austria began on Monday in response to the surge of COVID-19 cases. According to Jens Spahn, German health minister, vaccinations alone won’t be able to stop the spread of disease.

The safe-haven currency can extend its recent rally this week and set a new 2021 high… further strong inflation in the U.S. will further drive up the market pricing of Fed rate hikes and the dollar momentarily.