EUR/USD higher as pressure grows on China to ease zero-Covid policy

Key Movers

The euro is pushing higher this morning as pressure builds on China’s President Xi Jinping to relax the country’s zero-Covid policy which has seen tens of millions of Chinese citizens subject to mass testing and lockdowns in an effort to shut the virus out of the world second-largest economy. Given China’s strong trading ties with Europe, in particular Germany, the growing rumors that the Chinese hierarchy may begin to ease restrictions have lifted the single currency however at present the official line from the government is that it is sticking to its strategy. There have been mass protests in China with some calling for the President to resign which has rattled stock markets around the world. Should the government finally buckle and loosen restrictions it would give stock markets a huge boost and also help dampen inflation as the shortage of goods leaving China caused by the policy has been a contributor to the high inflationary environment we find ourselves in. It would also likely lead to a further rise in EUR/USD however as mentioned before President Xi seems to be sticking to his guns for the time being. Away from China, it’s a quiet start to the week however Wednesday sees the latest inflation data from the eurozone with CPI expected to show a slight fall from 10.6% to 10.4%. Later that day we have the second reading of third-quarter GDP from the States as well as a speech from the head of the US Federal Reserve Jay Powell. Friday sees this week’s main event with the latest US jobs data due. The Non-Farm Payrolls report is expected to show around 200k jobs were added in November. EUR/USD is up to 1.0440.