The U.S. dollar appeared to weaken in early European trade on Tuesday. It is because the clarity over the American political transition has begun to emerge. Janet Yellen's appointment to be the next Treasury Secretary further reinforces expectations of expansive fiscal policy under Joe Biden.
It is known that Joe Biden himself is a figure who is running for president of the USA this year. He gained more votes than Donald Trump as an incumbent. The Dollar Index on global markets reported a fall of 0.3% and was at 92.252.
It could be said that market participants saw their lowest level since September 1 overnight. However, not all currencies have declined due to Joe Midwife's transition. Some are getting stronger and showing an increase in the global market lately.
Currency Movements in the Market
EUR/USD rose 0.3% to the point of 1.1873. Its growth was largely helped by a revision that rose to Germany's third-quarter GDP growth to 8.5%. The figure increased from the previously reported 8.2%. Elsewhere, USD/JPY fell by about 0.2% to 104.30.
AUD/USD as a kind of risk-sensitive currency also rose as much as 0.9% to 0.7353. Emily Murphy, head of the Public Service Administration, acknowledged that Biden was the winner of the presidential election, saying he could have funding and briefings to ease his transition.
The transition in question is mostly to the authority. President Donald Trump signaled his approval of the move via his Twitter account. Still, he promised to keep fighting to try and cancel the votes which were taken in several states.
Murphy, Trump's appointee, had previously withheld his decision for weeks after the November 3 election. The situation has left markets unsure whether there will be a prolonged political vacuum. As a result, many market participants are more cautious right now.
What Supports the Positive Sentiment?
The removal of fears as it is explained above has led market participants to look for more risks. Their decision could ultimately hurt the safe-haven dollar. However, there are also factors that help positive risk sentiment until now that makes investors a little relieved.
An example is the appointment of former United States Fed Chair Janet Yellen to be Treasury Secretary in the upcoming Biden administration. Recently, Yellen called for more federal spending from Congress to address the economic devastation caused by the covid-19 pandemic.
If it is indeed realized, then it can be regarded as a move to encourage the low-interest rate policy adopted by the Federal Reserve. The main goal remains to combat the pandemic. Furthermore, it is known that corona cases in various countries are still not finished.
Vaccines and Brexit Deals Awaited
There are other reasons why market participants could be veering into risky currencies. The reason for this is the recent promising news about the presence of effective vaccines. The latest update was last Monday where data pointed to AstraZeneca candidates, which were produced.
Reportedly, AstraZeneca has an effectiveness rate of up to 90%. It means that it is effective in preventing Covid-19. The update continued previous positive news from Pfizer and Moderna. All three are reported to have no harmful health side effects but still needs further tests.
Elsewhere, GBP/USD rose 0.4% to 1.3371. The figure is close to a 12-week high as market participants expect the UK and EU to finally reach a post-Brexit trade deal. It is known that until now there are still some points that are difficult to discuss.
An analyst at ING, in a research note, said that the deal remained their strongest hope. According to him, GBP will face an asymmetric negative reaction if the negotiations eventually fail. That is why; chaos in some aspects may also occur.
