Dollar Dives on Stimulus Package As Brexit Negotiation Continues

Dollar Dives on Stimulus Package As Brexit Negotiation Continues

On Wednesday, the dollar continued to lose ground against all its main rivals. Hopes for a US stimulus package kept it on the sell-off despite poor stock performance as European indices closed in the red, while US indices were only able to post modest intraday gains but closed the day in the red.

Negotiations between House Speaker Nancy Pelosi and US Treasury Secretary Stephen Mnuchin continued without a deal. The delay in negotiations affected market sentiment ahead of the close.

The second wave of coronavirus hit Europe hard enough. Curfew is being studied in different countries, as a record number of new cases are registered in Spain, Italy, and the UK. Curfew and additional restrictive measures are under study. UK Chancellor Rishi Sunak will unveil the fourth COVID-19 support package.
COVID-19 Condition of Europe and EUR/USD Outlook
The COVID-19 health crisis has been a historic shock to the eurozone’s fragile economy and banking system. The weakness of individual national economies, such as the Italian economy, has been a longstanding topic in the markets and problematic for the euro and European politics. Recent trade has revealed how serious the surge in new COVID cases is for various countries in Europe.

However, despite this, the euro has accelerated, reaching a monthly high of 1.1880 as the US dollar falls on hopes of boosting the economy. However, technically, the prospects for the euro do not look as rosy as the situation with the spread of the virus, not only for the economy but also for European politics.

Investors found confirmation both in the ECB’s commitment to easing and in the EU Recovery Fund. This has raised hope that European politicians have finally taken small steps towards a more harmonious financial structure.

However, CFTC data with strong long EUR positions coupled with the second wave of covid-19 could crash into the single currency. New funding needs could spark a new debate about financial support, and this is where the euro’s bullish rally could fail. Against this background, ECB officials do not hide their dovish forecasts, preparing the market for further actions in the field of monetary policy in the coming months.

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Author : Azeez Mustapha

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Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.