EUR Heavy Again as Merkel Paints Bleak Picture

Following the sharp sell-off this week, stocks have stabilised a little in Europe, but the bounce is shallow and there's no sign of a sharp recovery at this stage. This has translated into a mixed USD, leaving FX largely non-directional so far.

GBP is modestly outperforming, still getting some support from yesterday's Bloomberg report which suggested that gaps were narrowing between EU and UK negotiators. EUR is faring less well, with German Chancellor Merkel this morning painting a stark picture of Germany's current status - she stated that health authorities are near their limits and the situation is dramatic. EUR/USD sits just above the Wednesday lows at $1.1718. A break below here opens $1.1689 key support ahead of $1.1612.

The ECB rate decision takes focus going forward. While the ECB are not expected to pull the trigger on further policy action today, pressure is clearly building on the governing council given the fragile recovery and the looming risk of further lockdowns.

Weekly US jobless claims data are due as well as Q3 advance GDP numbers from the US, which are expected to show GDP growing at 32% on an annualized basis.