EUR / USD sits at 1.1900 low, worst week since October

• EUR / USD is ending the week at the 1.1900 low, up 1.3% on the week.
• That means the pair is set for its worst week since October 2020.
• Further increases in the euro’s falling interest rate ensured that the single currency fought its peers.

The EUR/USD It has been moving sideways for the past hours at the 1.1900 low. After coming under heavy selling pressure following comments from Federal Reserve Chairman Jerome Powell on Thursday and losing its grip on the 1.2000 level, the pair saw further selling during the Asia Pacific session on Friday, time during which fell below 1.1950. Then a strong US NFP report sent EUR / USD very briefly below 1.1900, although this level was well defended.

On the day, the EUR / USD is trading around 0.4% or around 50 pips below the open. That means the pair will close the week with losses of around 1.3%, its worst week since the last week of October 2020. That puts the euro in third place from the bottom on this week’s G10 currency performance chart. , with only the JPY (1.7% down against the USD) and the CHF (2.3% down against the USD) underperforming.

Why has the euro underperformed this week?
Yield spreads are the first thing to look out for this week. While central European government bond yields were largely unchanged over the week (the yield on German 10-year bonds is roughly where they started the week at around -0.30%, as is the yield on 10-year French bonds around -0.05%), bond yields in the other G10 countries have recovered. For example, 10-year yields in the US increased by around 15 basis points (from 1.40% to around 1.55%), 10-year yields in Canada increased by around 10 basis points (from around 1.35% to 1.50%) and the 10-year yields in Australia. they have risen about 15 basis points (from less than 1.70% to just under 1.80%). As the drop in interest rates widened further against these currencies, the euro has understandably underperformed them.
A key reason why European government bond yields have not recovered much this week (and why the euro has suffered as a result) is probably the fact that the ECB has been much more eager to act to prevent the increase in yields that the Fed; Not all ECB members agree with the idea of ​​accelerating the pace of banks’ weekly asset purchases, but officials have made it very clear that they are “closely monitoring” movements in long-term interest rates. . On the contrary, the Fed has taken a less aggressive stance; Officials, including Powell, have noted that last week’s bond market movements caught their attention, but there doesn’t seem to be the same enthusiasm to do anything about it.

Elsewhere, unlike the US, UK and many other countries, the pandemic situation in Europe is not improving. In fact, according to the WHO, Covid-19 infections actually accelerated in the EU last week. Italy is tightening restrictions, France is still under a curfew (which seems likely to be extended) and the threat of a return to full lockdown looms in Germany, while current restrictions have recently been extended again.

European officials are concerned about the spread of Covid-19 variants; the UK was devastated by the ‘UK’ variant during the winter, which was up to twice as transmissible and 30% more deadly. It appears that the UK strain is becoming the dominant one in the EU. Meanwhile, the bloc’s vaccine launch continues to lag behind that of other core countries.

Technical levels