EUR/USD slumped to its weakest level in more than a year at 1.1366 late Monday. With fears of new covid measures in the “Old Continent”, the euro is set to continue its downfall, in the view of economists at MUFG Bank.

COVID-19 disruption fears return in Europe

“The recent weakness could reflect in part building concerns over the pick-up in COVID-19 cases in Europe heading into the winter period. Our measure of new COVID-19 cases in the eurozone has risen sharply over the past month and reached the highest levels since the start of this year.”

“There is a growing nervousness over the risk of renewed lockdowns. The negative implications for the euro-zone economy will be limited so far with the eurozone economy set to expand robustly this year by around 5.0%. However, the fear that the situation could escalate and result in a more significant tightening of restrictions in the coming months is hurting sentiment towards the common currency.”

“The negative developments are supporting our short EUR/USD trade idea as it moves closer to our target at the 1.1300-level.”