07.12.2022 02:54 PM
China abandons Covid Zero policy
The euro and other risky assets, including the British pound, are slowly recovering amid news that China finally abandoned its Covid Zero policy, loosening a number of restrictions it had imposed long after the rest of the world had lifted them. By abandoning key principles to limit the spread of the coronavirus, including the requirement to quarantine infected people, China's Covid policy has begun to ease faster than expected. Experts note that the abandonment of a number of significant restrictive measures reflected growing pressure on Xi Jinping.

This image is no longer relevant

The National Health Commission of China has outlined 10 new principles it intends to adhere to after the country's reopening was initiated. An additional 20 recommendations for officials were also developed.

However, markets reacted rather calmly to this news, as it was expected as early as last week that a consensus on this issue would still be reached. However, the initial rally in risky assets collapsed, as some investors were concerned about the surge in the number of new cases. After that, strong fundamental statistics on the US came out, which wrecked hopes of an early loosening of monetary policy by the Federal Reserve.

In China, the data showed that recent steps taken by the authorities include speeding up vaccinations for the elderly and prohibiting local authorities from imposing restrictions on large facilities. Also, the green health code in smartphone apps, which was asked for domestic travel or to enter large public places, is no longer required.

As experts point out, the nationwide rollout of the home isolation rule, first introduced in Beijing after quarantine facilities became short on space, could change the public perception of the virus from a serious health threat to more widespread disease. The government defended its Covid Zero approach throughout the pandemic with a policy of widespread testing and blocking to eliminate infections. As a result, this left China isolated and caused poverty and economic hardship.

Judging by the latest data coming out of China, such measures have already damaged the economy quite substantially, slowing down its growth and negatively affecting households, which, along with psychological stress, have been struggling with financial problems. Trying to recover the economy, high-ranking officials have set the economic growth goal at around 5% in 2023.

As for the EUR/USD pair, the demand for the US dollar has weakened a bit. To return to growth, the euro needs to break above 1.0480, which will spur the trading instrument to the area of 1.0530. In this case, the price may climb to 1.0560. If the pair breaks through the support of 1.0440, it may put more pressure on it and push the euro to 1.0390, opening the way to the low of 1.0330.

As for the GBP/USD pair, after yesterday's downward sharp movement, bulls are likely to take control of the market. They need to break above 1.2150. If this level is broken through, the price may return to the area of 1.2200. After that, it will be possible to speak about a sharper rally to the area of 1.2265. The pressure on the trading instrument may return after bears take control over 1.2070. This will strike a blow to the bulls' positions and push the British pound back to 1.2000 and 1.1955.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2023
Euro vs US Dollar
Select timeframe
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex always strives to help you
    fulfill your biggest dreams.
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
  • 30% Bonus
    Receive a 30% bonus every time you top up your account

Recommended Stories

Has oil bottomed out?

If someone does not believe that there is a crisis, look at the commodities market. Gold, traditionally considered by investors as a safe-haven asset, is growing by leaps and bounds

Marek Petkovich 11:43 2023-03-21 UTC+2

Chances of gold from $2,000

According to Willem Middelkoop, chief investment officer and founder of Commodity Discovery Fund, the rise in prices for the precious metal this year to record levels is only a matter

Irina Yanina 11:03 2023-03-21 UTC+2

Euro rises as ECB chief Christine Lagarde says they are not done raising rates

EUR/USD rose on Monday as statements of ECB President Christine Lagarde indicated that the central bank does not plan on abandoning its aggressive rate hike even amid the current situation

Jakub Novak 10:45 2023-03-21 UTC+2

The Fed could give up on further rate hikes as early as tomorrow

Both euro and pound continue to see gains as expectations of a pause in interest rate hikes by the Fed grows stronger. Late last week, many economists expressed belief that

Jakub Novak 10:17 2023-03-21 UTC+2

GBP/USD. Overview for March 21, 2023

On Monday, the GBP/USD currency pair confidently continued on its upward trend, which no longer exactly fits the definition of a "swing." The pair did surpass both its most recent

Paolo Greco 10:01 2023-03-21 UTC+2

EUR/USD. Overview for March 21, 2023

On Monday, the EUR/USD currency pair was trading higher once more, which makes sense but only takes into account one factor. "Technique" is this factor. The fact is that

Paolo Greco 08:52 2023-03-21 UTC+2

ECB is not going to stop, but together with the Bank of England may slow down the rate increase

The past and current weeks were supposed to pass exclusively to the accompaniment of central banks. Let me remind you that last week the ECB held meetings, and this week

Chin Zhao 22:53 2023-03-20 UTC+2

USD/JPY. The yen follows the dollar: the dollar sets the tone for trading

The USD/JPY pair updated its five-week low today (reaching 130.50) but subsequently returned to its former position, the opening price. The US dollar's strength/weakness is what causes the upward/downward dynamics;

Irina Manzenko 19:00 2023-03-20 UTC+2

EUR/USD on a bullish rally

The banking crisis could be the black swan that makes a bearish stock market turn around. Ironically, this is usually the case. Investors focus on an event that is initially

Marek Petkovich 16:04 2023-03-20 UTC+2

Is the gold market overbought?

Gold prices could rise this week as bullish sentiment grows among retail investors seeking to protect themselves from a major banking crisis like 2008. Nevertheless, Wall Street analysts take

Irina Yanina 13:43 2023-03-20 UTC+2
Can't speak right now?
Ask your question in the chat.