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Dollar Weakens; Vaccines and Likely Stimulus Buoys Risk Appetite

Wednesday,   25-Nov-2020   02:12 PM (IST)

The dollar continued to weaken in early European trade Wednesday, with riskier currencies more in vogue as investors look to the new administration in the U.S. for additional stimulus amid solid progress towards Covid-19 vaccines. At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 92.052. EUR/USD climbed 0.2% to 1.1908, close to a two-month high, GBP/USD rose 0.2% to 1.3376, close to its highest level in more than two months, while USD/JPY was largely flat at 104.44. The greenback is also close to a two-month low against the Australian dollar and a two-year low against the New Zealand dollar, both considered barometers of risk sentiment due to their close ties with the global commodities trade. Risk appetite has improved after the outgoing President Donald Trump's administration began cooperating with the transition to a Joe Biden presidency, and after reports that former Federal Reserve head Janet Yellen, an advocate of bigger fiscal stimulus, is set to become Treasury Secretary. This has added to the general optimism surrounding the likelihood of the prompt delivery of multiple Covid-19 vaccines, with positive news from Pfizer, Moderna and AstraZeneca of their trials over the last couple of weeks. There is an abundance of U.S. economic data due for release later in the session, ahead of Thursday’s Thanksgiving holiday, including the Federal Reserve’s minutes of the most recent Federal Open Market Committee meeting, U.S. jobless claims and GDP data. Sterling will remain in focus Wednesday, remaining bid as traders expect a trade deal to be agreed between the U.K. and the European Union in the near future given the end of year deadline and recent optimistic noises emerging from the talks. On Tuesday, influential U.S. investment bank JPMorgan raised its odds of a Brexit trade deal to 80%, up from two-thirds.