The European currencies rallied on Wednesday. The British pound jumped by 0.6% to a session high of $1.1834, while the euro rose by 0.3% to $1.0819. Several other currencies also showed gains. The New Zealand dollar increased by 1% at $0.5894.
Meanwhile, the Australian dollar soared to $0.6047. The Aussie rose over the 60-cent mark for the first time in a week as the authorities released the news about the agreement to help fight the coronavirus’s impact on economies.
The U.S. dollar, on the other hand, declined twice on Tuesday, before falling again on Wednesday for a third consecutive session. The greenback lowered by 0.2% to 101.43 against a basket of currencies. But it was steady against the Japanese yen at 111.17 yen per dollar. The dollar’s downfall was caused by the same deal, which was boosted by other currencies.
What is the new agreement about?
Authorities agreed on a deal to backstop the U.S. economy with a huge fiscal stimulus package to ease some of the demand for hard cash. During the last days, investors have been trying to get as much cash as they could, selling everything for the dollar.
According to the U.S. Senate majority leader Mitch McConnell, the package will probably be worth $2 trillion. So far, details of the U.S. rescue bill are not clear, but the Senate’s Democrat leader Chuck Schumer stated that it included $150 billion to aid hospitals and the same amount for supporting governments.
Investors see the fiscal bazooka in action – noted Moh Siong Sim, the currency analyst at the Bank of Singapore. That should help further ease the dollar funding stress. According to Sim, there has been a need for cash to ride through this period where there is a revenue shortfall. However, the deficit could be alleviated if affected businesses find the help quickly.
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