FINAM FOREX: Dollar Strengthens Amid Growing Pessimistic Sentiment Due To New Covid-19 Strain

22 December 2020

Andrey Maslov, analyst, FINAM Group

On Tuesday, December 22nd, the US dollar strengthens against a basket of major currencies. The DXY dollar index is trading up 0.20% in morning trading at 90.132. The EUR / USD rate is growing by 0.19% and is at the level of 1.2224.

After reaching a 2.5-year low in November-December of this year, the American currency stopped falling at the end of last week and has been gradually strengthening in recent days. This is due to pessimistic sentiment in global markets regarding a new strain of coronavirus identified in the UK last week. More than 20 countries, including France, Germany, Italy, the Netherlands, Ireland, Canada, Argentina, Chile and Russia, have suspended flights to the UK. A full lockdown was introduced in London and southeast England, which is putting pressure on business and will certainly affect the pace of economic recovery. Thus, risk appetite among investors has noticeably decreased, providing a chance for the protective US dollar to strengthen ahead of the New Year.

Sir Patrick Vallance, the UK’s chief scientific adviser, said Monday that the new strain’s increased transmissibility has been confirmed, which “likely means that measures (in the fight against coronavirus) will be tightened in some areas and will not be relaxed.” At the same time, according to experts, there is no evidence that newly registered vaccines will not protect against strain B.1.1.7.

Given the situation in the UK, the focus of investors has shifted again towards the coronavirus pandemic. However, another important news was the approval by the US Congress of a new package of fiscal stimulus. Recall that the $ 2.3 trillion bill will be divided into two parts: $ 900 billion for stimulating measures and $ 1.4 trillion for state funding. expenses for the next financial year. After approval by the House of Representatives and the Senate, President Donald Trump will have to sign the corresponding decree.

As for macroeconomic statistics, yesterday the index of national activity from the Federal Reserve Bank of Chicago for November was published, which amounted to 0.27 pp against the forecast of 0.40 pp, which was less than the result of the previous month of 1.01 pp …

On Tuesday, one should pay attention to the publication in the USA of the final data for the third quarter on GDP, GDP deflator and corporate profits. In addition, the numbers on existing home sales for November, the CB consumer confidence index for December and the Richmond Fed manufacturing activity index for December will also become known.

EUR / USD quotes are consolidating at the level of the previous maximum and at the moment they continue to gradually decline, trading at the level of 1.2224. Stochastic lines turned down and are at the border of the overbought zone, which speaks in favor of the continued decline in the instrument in the short term.

This information is not investment advice.


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