Dollar Weakens; Hopes on Stimulus to Combat Pandemic

The dollar weakened in early European forex trade on Friday. It was set to post weekly losses with traders anticipating large-scale stimulus from the new administration in fighting the pandemic.

The Dollar Index was down 0.1% at 91.892. It was near the three-month low since late Thursday at 3:55 AM ET (0755 GMT). 

Until after Thanksgiving on Thursday, volumes are expected to remain limited, with many traders set to enjoy a long weekend.

EUR/USD gained 0.1% to 1.1926, near a two-month high, while USD/JPY dropped 0.2% to 104.06. Moreover, AUD/USD climbed 0.2% to 0.7372, close to a three-month high. NZD/USD rose 0.2% to 0.7021, near its strongest level in more than two years. 

President-elect Biden has made it clear that tackling the pandemic is his first priority. He called on U.S. lawmakers to pass a new stimulus bill, which he expects before taking office in January.

He has nominated Janet Yellen, former head of the Federal Reserve. Yellen takes credit for her help in steering the economic recovery after the 2007 financial crisis and the ensuing recession.

This nomination has also played into the underlying belief that more fiscal help is on its way, thus pressurizing the dollar. 

GBP/USD edged up 0.1% to $1.3369, near a three-month high of $1.3399 it touched on Thursday. Market participants are still looking for progress on Brexit talks.

The European Union chief negotiator Michel Barnier will talk on Friday with some of the bloc’s ministers responsible for fisheries. An EU official said the talk would be concerning the state of play in the trade discussions with Britain.

EUR/USD Calm on U.S.Thanksgiving Holiday

Meanwhile, the  EUR/USD pair was showing limited movement on Thursday. It was trading at 1.1904, down 0.07% on the day. US markets were closed for the Thanksgiving holiday, thus a quiet North American session was likely.

The euro hasn’t posted sharp gains this week against the struggling greenback, unlike some of the other major currencies. However, the pesky euro has moved slowly but surely,  within striking distance of the 1.20 level.  That has psychological importance.

The currency hasn’t been this strong since early September. It should be noted though, that this upswing is more a case of US dollar weakness, rather than euro strength. 

The eurozone economy remains in slow gear as the coronavirus crisis continues.