Euro Falls As U.S Tariffs, Tighter Restrictions Weigh

The euro dropped against its major counterparts during the European session on Thursday, as European stocks fell on the last trading day of the year, with markets in Germany, Switzerland and Italy closed for the New Year Eve holiday.

Trading volumes were light as many traders were away from their desks ahead of the New Year break. London's FTSE 100 and and France's CAC 40 will close early today.

The U.S. government's decision to increase tariffs on EU products weighed on sentiment.

The Office of the U.S. Trade Representative on Wednesday said that it would hike tariffs on aircraft components and wines from France and Germany.

Amid surging virus cases, the U.K. government tightened restrictions in more parts of the country.

The Midlands, North East and parts of the North West and South West will be moved to Tier 4 restrictions from today.

The euro fell to 1-week lows of 1.5635 against the loonie and 0.8975 against the pound, after rising to 1.5690 and 0.9032, respectively in early deals. The next possible downside target for the euro is seen around 1.54 against the loonie and 0.88 against the pound.

The euro depreciated to a 3-day low of 126.45 against the yen, following a high of 126.98 seen at 7:30 pm ET. The euro is likely to test support around the 122.00 level.

The single currency reached as low as 1.2275 against the greenback, down from a high of 1.2309 set at 8:00 pm ET. The euro is seen finding support around the 1.20 level.

Extending early declines, the euro hit a 1-1/2-year low of 1.5868 against the aussie and a fresh 5-week low of 1.6955 against the kiwi, off its previous highs of 1.6010 and 1.7074, respectively. Next immediate support for the euro is seen around 1.56 against the aussie and 1.66 against the kiwi.

Looking ahead, the U.S. weekly jobless claims for the week ended December 26 will be featured in the New York session.