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.