The U.S. dollar traded lower in early European trading on Thursday. The cause is poor U.S. data. Meanwhile, optimism over the presence of coronavirus vaccine encourages market participants to look for riskier currencies in global markets lately. The Dollar Index was reported declined.
They have declined by 0.1% at 91.892. This means that the currency fell to its lowest level in more than two months. The presence of limited volume and the holiday period in America to celebrate Thanksgiving is one of the several factors causing the decline of the USD.
According to the latest release, the EUR/USD pair rose by 0.2% to 1.1931. That position is near its highest in two months. Elsewhere, GBP/USD also increased by 0.1% to 1.3366 and is near its highest level in more than two months. Meanwhile, USD/JPY fell by 0.1% to 104.34.
Expectations of Stimulus Still Exist
The AUD/USD currency pair reportedly rose slightly to 0.73664, which is close to its highest level since September. Meanwhile, NZD/USD also rose slightly to 0.70036. That means that the pairs are close to their strongest level in more than two years.
Both currencies are considered to be a guide to risk-taking sentiment. It is due to its proximity to global commodity trade. The existence of a low-risk environment and positive prospects for Covid-19 recovery in 2021 encourage further flows from the dollar to the cyclical FX situation.
That was conveyed by an analyst at ING in the latest research note. Optimism about the possibility of immediate delivery of some Covid-19 vaccines continues to emerge. This was added to expectations of more fiscal stimulus from the upcoming Biden administration in America.
That was especially so after preliminary weekly unemployment claims data on Wednesday showed unemployment there rising again. This data surprised many parties in the global market considering some time ago it had shown a decline and good progress.
The Latest Release from the Fed
The Federal Reserve recently released the minutes of its last monetary policy meeting. More precisely was on last Wednesday. They point out that Fed members are debating various options on bond purchases to support the recovery. One of them includes pivoting to the purchase of long-term securities.
The move is considered to put more pressure on the dollar market by keeping long-term yields low in less attractive circumstances. Minutes of the meeting showed that the Fed was looking for a solution on how to change asset purchases in December. Operation Twist may happen.
Their party still thinks that Operation Twist can only reduce the latent steep pressure on the USD curve. That opinion was echoed by an analyst at Nordea some time ago. Elsewhere, GBP/USD increased by 0.1% to 1.3390, near its strongest level since early September.
Britain's Future Economic Predictions
The EUR/GBP pair also rose slightly to 0.8917. Market participants are now looking for details on Brexit trade talks between the UK and EU, particularly this week. Sterling reportedly continued to bid despite British Chancellor Rishi Sunak stating conditions about the possibility of the UK economy.
Rishi Sunak states that under the one-year spending plan, the UK economy is likely to shrink by more than 11%. That means the country will have to borrow nearly 400 billion pounds this year as a devastating pandemic impacts its economy.
It means that the budget deficit will soar to its highest level since the Second World War. Talking about the main driving factor of GBP, the currency is still awaiting the exact outcome of the UK-EU trade negotiations.
If the result is successful, it will bring EUR / GBP to the level of 0.88. This was conveyed by ING sometime ago. Some are now beginning to be optimistic that Brexit will find a deal even if the time is right.
