The euro languished below 1.18 on Monday as the prospect of tougher coronavirus curbs in France and Germany weighed on the shortterm outlook for the European economy.

The euro slipped 0.2 in London trading at 1.1774, nearing last weeks fourandahalfmonth trough of 1.1762. On a monthly basis, it is down 2.3, its biggest drop since July 2019.

Compounding the singles currency woes have been the widening interest rate differentials between German and U.S. yields. The spread for 10year debt widened to 200 basis points from 150 bps at the start of the year, boosting the dollar.

In a nutshell, the U.S. economy is much stronger and miles ahead in the immunization game compared to Europes and Japans, and this ultimately translates into the Fed normalizing policy years before the ECB or the BoJ, said Marios Hadjikyriacos, a strategist at brokerage XM.

The euros woes have worsened as Europes faltering vaccination programme runs into a wave of new infections, even as positioning data showed investors remain heavily long euros, a bearish sign for investors. and

Much focus will remain on the virus situation in Europe and whether lockdowns can slow rising case numbers and also whether the slow pace of vaccinations can finally reach exit speed, ING economists said in a daily note.

The dollar held firm against other currencies as a slight riskoff sentiment rippled through global markets, with U.S. stock futures in negative territory in quiet quarterend rebalancing flows.

YEN…