EUR/USD: Ready To Crack The Double-Top? Georgia Elections Are Critical

Is the bout of bad covid news priced into EUR/USD? That is the key question after markets suffered on the first trading day of 2021. If markets already price in the depressing developments, there is room to rise and re-attack 1.2310.

The UK announced a third – and harsh – nationwide lockdown to slow the spread of coronavirus and its highly contagious variant. Germany extended its restrictions and other countries may follow as the winter wave continues raging. The US is also struggling with record hospitalizations, and data on both sides of the pond is probably incomplete amid the holidays.

Another source of concern comes from the vaccination campaign, which is advancing at a snail’s pace. Germany is leading the eurozone, but with only around 0.32% of its population having received the inoculation. France’s distribution is in the hundreds. While the US is doing better, bottlenecks and disarray have resulted in only 1.38% of the population receiving either the Pfizer/BioNTech or Moderna jabs.

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Source: OurWorldInData

Uncertainty about Georgia’s special elections also troubled investors on Monday – but there is room for optimism, at least during Tuesday. Markets prefer both Democratic candidates Jon Ossof and Raphael Warnock to win their respective races against Republican senators David Perdue and Kelly Loeffler. A dual victory would provide President-elect Joe Biden room to push for more stimulus.

Recent opinion polls – which have been relatively accurate in the general elections – show a small lead for Dems. High Black turnout in early voting also contributed to hopes. Will Election Day turnout remain high? The national attention on the runoffs suggests voters will rush to the polls also on Tuesday, thus raising hopes for a Democratic win.

Reports of long lines in Atlanta could boost stocks and weigh on the safe-haven dollar – potentially sending EUR/USD above 1.23 before voting ends.

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