US Dollar Gains as Europe’s Economic Recovery Hopes Falter

On Thursday, the US dollar has surged to the highest level in four months against the common currency as the gap between the US and Europe on economic recovery continued to widen, especially after Europe announced fresh restrictions and lockdowns to combat the third wave of the pandemic. At the time of writing, the US dollar index DXY is trading around 92.59.

The greenback extended its winning streak from the previous two consecutive sessions into early trading today as its safe haven appeal strengthened amid fears that Europe’s economy could be further hit by the latest wave of infections. In addition, traders also worried about a possible hike in corporate taxes across the US even as high inflation fears remain in traders’ minds even after Fed chair Powell downplayed its effects on the economy.

Global markets have turned their focus towards Europe after several countries, including Germany – Europe’s most powerful economy, extended restrictions in a bid to contain the spread of the pandemic. There has been significant opposition to the latest round of lockdowns among citizens among growing frustration about the slow pace of the COVID-19 vaccine rollout, especially in comparison with its peers like the UK and the US.

While these fears drove EUR/USD to a four-month low, the US dollar index DXY is trading close to the highest level seen in four months. The reserve currency has received more interest among investors over rising expectations that the US economy will post a faster recovery than most other countries, especially on the back of President Biden’s stimulus and investment plans.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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