The euro continued to decline during the European market session after being weakened by the rising US dollar amid rising concerns over the continued rise of the Covid-19 case in Europe.
This currency trade is likely to decline to the price level of 1.1600 or lower against the US dollar due to these factors:
1. Covid-19 Second Wave Transmission Throughout Europe
The surge in new cases in Europe has raised concerns that it will fall back into the recession experienced during the Covid-19 crisis earlier this year.
Daily figures recorded the highest reading over the weekend in France of 26,896 cases, and about 10,000 cases in Spain while in Germany more than 4,000.
2. The Implementation of New Restrictions Also Means Multiple Recession
Having seen the highest increase in daily cases, as well as more new sanctions being implemented to curb the spread then it is not impossible that the European economy will be affected more severely.
3. Wider Relaxation By ECB
Following continued concerns over the impact of sanctions on the European economy, it will force the European Central Bank (ECB) to further increase easing in their monetary policy.
In fact, just by looking at the record-breaking inflation rate in September, more easing is needed to meet central bank targets.
4. US Election Uncertainty
The uncertainty ahead of next month's presidential election could also lead to a collapse in the US stock market and push investors to let go of risky holdings such as the euro.
