The EURUSD currency pair was trading up over 22 pips as the single currency made a weak attempt to rally against the US dollar on the last trading day of the week ahead of the Christmas break, typically characterised by weak trading volumes.
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The lack of news releases from the European docket left the euro without any significant drivers, which explains the lack of conviction in today’s move higher. However, the euro has benefited from the risk-on market sentiment driven by optimism about China’s shifting COVID policies.
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As the world’s manufacturing hub, China’s recent loosening of its strict COVID-zero policies has been welcomed by most businesses and investors globally, given the previous restrictions had negatively affected production across the country.
However, China is now dealing with a new problem as COVID-19 infections soar and employees call in sick. The result of the surge in new infections has hit production at many manufacturing facilities, which was expected.
Still, investors are optimistic that the infection rates will subside as COVID-19 spreads across China and the population builds resistance to the various strains, like in many other countries, including the US and Europe, which opened their economies months ago.
COVID-19 infection rates tend to skyrocket immediately after a country or region reopens. Furthermore, investors are looking forward to the publication of the US Core Personal Consumption Expenditure (PCE) later today, which could affect the pair’s performance.
The PCE data is a crucial report since the Fed uses it to gauge the inflation levels in the United States and bases its monetary policy decisions on the print.
Another critical release that many are awaiting is the US durable goods orders, which is another crucial indicator of the health of the US economy. These two reports will affect the dollar’s and the EURUSD’s performance.
Still, we will likely have much less volatility in the markets over the next week as traders take a break to enjoy the Christmas holidays. However, we could get some volatility based on geopolitical events such as the war in Ukraine.
*This is not investment advice.
EURUSD price chart.
The EURUSD currency pair was trading up 22.4 pips (0.21%) as the euro made gains against the dollar.
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