Majors Halt Recovery, All Others Rise on Sentiment
The U.S. Dollar is being pulled in different directions after a strong rally of global equities overnight.
Indeed, worldwide exchanges improved as negotiations towards the approval of a rescue and recovery package for the European Union got the task accomplished. Out of the €750.0 billion agreed upon, €390.0 billion will be handed as grants without need for repayment. Naturally, this symbolizes a major step in regard to deeper integration of the trade pact.
The European Central Bank manages the monetary policy of the bloc, but this pandemic recovery plan is unprecedented as it involved the unanimous decision of all 27 member nations of the EU. Nevertheless, Euro is not at some new fresh high, rather emerging as well as commodity-based currencies took it as a major positive item and opportunity to recover. The MSCI Emerging Market Index rose 1.9%, but its currency equivalent is just building momentum and shall increase overall as U.S. session gets going.
U.S. Treasury Secretary Steven Mnuchin and Speaker of the House Nancy Pelosi will be meeting later this afternoon to try ironing out a package to alleviate the U.S. economy with $1.0 trillion in aid, yet Democrats want a much larger proposal that is about three times as high. Oil prices are helping petro-currencies such as CAD, MXN, and NOK. Gold also continues to reach new record high levels, which aids producers and their currencies ZAR, AUD, as well as NZD as suppliers of metals. Everything with China is looking fragile as the visit by U.S. Secretary of State Mike Pompeo to the U.K. also solidified an affront to China’s tech participating in the 5G networking of the region across the Atlantic.
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The Euro did not improve dramatically or even move in any way after it was announced that European leaders finally managed to get everyone on board and unanimously approve the much-anticipated €750.0 billion pandemic recovery package. Now that it is a matter of implementation, we shall see how efficient the funds are used and if certain nations need a bit more than others.
Overall, this will be a major test of the unions ability to cooperate and maintain not only a stable environment, but one that stimulates growth after months of quarantine as well as contractions all around. While we still see room for the shared currency to grow, much will weigh on this bill’s success as we also assess how the U.S. figures a way to ease the damage from COVID-19. The German DAX Index has already erased the losses of 2020.
The Australian Dollar is trading at its strongest level since July 2019 as it picked up steam this morning after breaking a six-week high. As the world rejoices on economic aid, the raw material-and-services rich economies of Australia as well as New Zealand are starting to look thriving.
Successful management of the contagion and geographical dependence on a healthier China are factors propelling the positive sentiment toward the Antipodean tender. Additionally, Reserve Bank of Australia governor Philip Lowe stated that the fundamentals of the economy remain strong as the country announced an extension of the JobKeeper wage subsidy program to March 2021.