The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of COVID19 and the continents lag in a vaccine rollout were weighing on the currency.
Down 0.1 against the dollar at 1.2117 by 1130 GMT, Europes shared currency had only the safehaven Swiss franc and Swedens crown for company in resisting a broad rally against the greenback by the G10 group of currencies.
Were getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a doubledip recession before long, said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europes lag in rolling out a coronavirus vaccine compared to the United States and Britain.
So all of that plays into the story that tomorrows ECB meeting, while uneventful in terms of policy announcements, could convey a relatively dovish message to the market. On top of that, President Lagarde could once again jawbone the euro, so the euro is kind of lagging behind.
Marinov also noted price action in the pound, which hit 1.3720 a 212year high and 88.38 pence its highest since May 2020 against the euro as a contributing factor to euro weakness.
There was also focus on a story by Bloomberg News, which reported the European Central Bank was conducting its bond purchases with specific yield spreads in mind, a strategy that would be reminiscent of yield curve…