EUR/USD: Attack On 1.22? Another Dose Of Good News Needed After The FDA Nod, ECB Boost

Euro/dollar’s consolidation may be coming to an end – and 1.22 is in sight, yet there are still some clouds to clear. After two injections of hope, additional developments are awaited.

The euro received a boost from the European Central Bank on Thursday. The Frankfurt-based institution announced a €500 billion expansion of its Pandemic Emergency Purchase Program (PEPP) as expected, but surprised by extending the program through March 2022. Investors cheered the move, which lowers governments’ borrowing costs. In parallel, the EU finalized the multi-year budget after a compromise with Poland and Hungary.

Christine Lagarde, President of the ECB, said that the bank is monitoring the exchange rate, but did not offer starker language meant to push the euro lower. Her lack of urgency on the topic also allowed the common currency to rise.

Another shot in the arm came from the US Food and Drugs Administration, which recommended approving the Pfizer/BioNTech coronavirus vaccine. The American regulator is considered the global “gold standard” and should accelerate injections worldwide.

On the other hand, immunization could not come sooner – COVID-19 is raging on both sides of the Atlantic. Germany is set to tighten restrictions ahead of Christmas as daily deaths and cases hit new highs. and France abandoned plans to lift the nationwide lockdown as infections stopped falling.

The US recorded another day of over 3,000 deaths and yet another record in hospitalizations, above 107,000. The virus is taking a growing toll on the economy – US jobless claims jumped to 853,000 from near 700,000 in the previous week.

Despite the dual developments, Senate Majority Leader Mitch McConnel remains reluctant to give his blessing to new stimulus worth around $900 billion. Proposals from a bipartisan group of senators and the Treasury seem stuck in the mud. The safe-haven US dollar may gain further ground if the progress made earlier this week fully stalls.

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