The US dollar strengthened further, based on the hawkish comments of Fed officials and the Euro which was hit by a wave of four cases of Corona virus infection.
The US dollar continued its rise to a 16-month high, in the trading session Monday (22/November) this evening, thanks to statements by US Federal Reserve officials that signaled an acceleration in the pace of stimulus tapering.
Last Friday, Fed Vice Chair Richard Clarida and Governor Christopher Waller shared a similar statement, that a faster pace of monetary tightening would be appropriate for the US economic recovery and rising inflation.
At an economic conference in San Francisco, Clarida said, "I will be closely watching the data we get between now and the meeting in December. Maybe it is appropriate to start talking about increasing the pace of stimulus reductions at that meeting."
Meanwhile in New York, Waller said, "The rapid improvement in employment and deteriorating inflation data have prompted me to tend to a faster tapering rate, as well as a faster elimination of accommodation in 2022."
At press time, the US Dollar Index was up 0.40% to 96.45, its highest since July 16, 2020. According to Joseph Capurso, analyst at Commonwealth Bank, the US Dollar could extend this week's rally and form a new high in 2021.
“Another round of strong inflation, could trigger markets to expect rate hikes in the FOMC and US Dollar.” Capurso said.
EUR/USD under pressure from COVID-19 Fourth Wave
On the other hand, the European continent, which was hit by the fourth wave of COVID-19 infections, also opened the gap for the strengthening of the US Dollar against the Euro.
As of today, Austria officially enforces a full lockdown policy to avoid worsening conditions like its neighbor, Germany.
Germany itself is getting overwhelmed by the tantrum of COVID-19 for the umpteenth time.
The most cases attack the elderly population who have even received a complete vaccine in early 2021, as well as children who have not been able to receive the vaccine.
As a result, economic activity must again be limited. This made the euro depressed to its lowest level since 06 July 2020.
EUR/USD is trading at 1.1238 as of this writing.
"EUR/USD is in free fall and is likely to get the most attention from clients looking for a chance to play (trade) amid tightening social distancing and (COVID) escalation across Europe," commented Chris Weston of Pepperstone, Melbourne. "For momentum, trend followers and tactical traders, EUR shorts are still attractive in this regard."
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