Euro drops to two-months low as COVID-19 fears lift dollar

The euro dropped to a two-month low on Wednesday as upbeat U.S. economic data and worries about a second coronavirus wave met tepid European indicators and lifted the dollar.

Against the euro, the dollar rose up to $1.1671, its highest since end-July, after Germany’s private sector recovered less than expected in September amid weak local driven services. 

French business activity also slowed to a four-month low in September, with services weaker than anticipated, as France struggled to contain a rise in new COVID-19 infections.

Traders in the euro and the pound are also worried that the European Union and Britain will fail to agree on a free trade deal, which would contribute to the economic strain. 

The dollar will likely continue rising as the coronavirus shakes sentiment in Europe. However, uncertainty about the upcoming U.S. presidential election could lead to volatile swings.

The pound slid to $1.2692, its lowest since end-July after Prime Minister Boris Johnson announced new restrictions on business activity to control a second wave of coronavirus cases.

The dollar steadied against the Swiss franc at 0.9201 following a 0.6% gain on Tuesday, when data showed U.S. home sales rose to their highest in almost 14 years.

The dollar index climbed to a high of 94.25 on Wednesday, its highest in two months.

The Aussie slipped to a six-week low of $0.7116, while the kiwi lost 0.56% to $0.6597.