The COVID news flow seemed to take a turn for the worse over the weekend… or maybe it’s finally just being noticed. There are reports of hospitalisations rising in the UK and while they may not be at the same level as in the first or second waves, if UK cases are to get to 100k, or even 200k a day then even on reduced percentages of hospitalisations, the numbers will still be high enough to challenge the idea that lockdowns are a thing of the past. This comes at an already challenging time for the growth narrative as PMIs top out and oil backs off its bull run with some negative news over the weekend. The confusing thing for currencies and high beta in particular is that despite this backdrop central banks continue to switch hawkish. The ECB will highlight the weeks calendar on Thursday and I wouldn’t be surprised to see a few days of muted activity in advance. The outcome to the ECB feels like it’s skewed in a bullish direction for the Euro from these levels. After the strategic review left the ECB even further from their goals, Lagarde raised the stakes for this Thursday suggesting it will be an important meeting. Realistically all we are likely to get is new forward guidance and the key will be the changes they make to the conditionality around raising rates; the statement “…sufficiently close to but below 2%...”. A shift to “very close to 2%” as our economists expect is the least they could do and given the heightened expectations, would be a disappointment. Additionally, there was a story late last week in a well followed news vendor that NIRP could be questioned as part of this strategic review, an outside tail risk in my mind but certainly something that would spice up Thursday. I like running long EUR on crosses headed into the meeting this week. Elsewhere on the calendar this week we get PMIs on Friday and we are likely to get the resolution of the US fiscal negotiations.