Dollar Falls to Multi-Year Lows on Brexit, Pandemic Relief Hopes

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Dollar Falls to Multi-Year Lows on Brexit, Pandemic Relief Hopes

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The U.S. dollar is under pressure again and fell to multi-year lows versus many of its counterparts, including the Euro and British pounds.

Overview

The Dollar Index is down for a third day as developments and economic data abroad increased risk sentiment and caused traders to sell dollars.  If the move holds, it would be the worst run for the greenback in two weeks.

Optimism is also growing that Democratic and Republican lawmakers will come to an agreement on the smaller, less controversial $748 billion bipartisan proposal.  The bill is meant to inject cash into the economy before the prior benefits expire at year’s end.  We will keep a close eye as we cannot take dealing making in Washington for granted.

Later this morning, the U.S. will release retail sales with the market expecting a contraction of 0.3%.  Markit PMI prints are due at 9:45 a.m.  Attention will then shift to the Federal Reserve which concludes its two-day meeting this afternoon.  It is widely expected the Fed will keep interest rates unchanged.  We will be looking for possible changes or updates on the central bank’s asset purchase program.  Fed Chairman Jay Powell will hold a press conference at 2:30 p.m.

What to Watch Today…

  • Retail Sales at 8:30 a.m.

View Economic Calendar

Read the latest currency outlook from our award-winning trading team…

Currency Outlook

EUR  

The Euro capitalized on a weak dollar and better-than-expected data and pushed to a fresh 2.5 year high versus the U.S. dollar.   The December Composite Purchasing Managers Index registered at 49.8, beating expectations.  However, a print below 50 shows contraction.  Only in 2020 can an economic print showing a contraction be seen as good news and propel a currency to multi-year highs.

Despite a deep sell-off in early March, the Euro is up 9% against the greenback this year which would be its best performing year since 2017.

GBP  

The British pound rose for the third day and passed its recent high last seen on December 4th.  The pound is now at its strongest level since May 2018 against the greenback.  Let us be clear, a post-Brexit trade deal is still not done with less than three weeks before the U.K. crashes out.  Nevertheless, optimism that the two sides will strike an 11th-hour deal continues to build.  Fishing rights appear to be the last major hurdle to a deal.

Even if a deal is struck this week, both sides will be in a full out sprint to get the deal ratified by the end of the year.  There is even talk of a possible Christmas Day vote in the U.K. parliament.

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