New restrictions across Europe
The results of the preliminary indicators are relatively worrying, as the eurozone may end up again in a contraction caused by the covid and subsequent government restrictions during the fourth quarter. France introduced new curfews last week, further extending it to other regions yesterday. However, the restaurants and bars remain open until 21:00. The Czech Republic and the Netherlands have returned to a partial lockdown. New restrictions in the Netherlands include restrictions on crowding, or closed bars and restaurants. New restrictions are also being introduced by Germany or Ireland, and other countries will continue to join in the event of a deteriorating situation. The pandemic has not yet shown signs of slowing down, and several countries registered a record increase in new infections yesterday.
Despite the fundamentals, the markets are positive
However, markets in Europe are still relatively positive today, and all indications are that the week will end on a positive wave. The euro has completely wiped out yesterday's losses and is back above 1.18 on the EURUSD pair. The British pound is also doing well, counting the latest news from the Brexit negotiation camps, where it has been said that both sides have made some concessions and the talks are still constructive. The German DAX index also followed yesterday's session and continues to grow today.
The report on a possible contraction in the region is not yet too great a danger for the financial markets. Many investors expect a larger economic downturn to put further pressure on the ECB, which would have to add another monetary stimulus, and a further wave of fiscal aid from governments is generally expected. Therefore, for the time being, the development of the markets is accompanied by a relatively positive mood. This was also supported by the belief that the new president will be a positive stimulus for the markets, which will deliver the long-awaited fiscal stimulus in the US.
Chart: 15M DAX index chart (Source: PurpleTrading cTrader)