Monex: EUR/USD rises due to uncertainty about US fiscal stimulus bill
Monex: EUR/USD rises due to uncertainty about US fiscal stimulus bill
This is a commentary of Ranko Berich, Head of Research at Monex Europe, on the USD, EUR and GBP exchange rates.
USD
The dollar strength seen over the past days ran out of steam overnight as any reassurance from markets around the fiscal stimulus bill faded after President Donald Trump demanded changes to the bill approved by Congress 24 hours earlier. President Trump called the bill a disgrace and demanded lawmakers to increase the individual stimulus checks from $600 to $2000. Earlier this week, President Trump signed for government funding to be extended through December 28 to avoid a government shutdown, however, the overall bipartisan deal is yet to receive Presidential approval. The dollar softened on the news, although France reopening its border with the UK has likely extended outflows from the dollar as risk appetite improves somewhat. In terms of data, initial jobless claims.
EUR
The euro is trading mixed this morning after the evident risk-off market mood somewhat faded following the reopening of borders between France and the UK, ending a 48-hour closure that crippled the Eurotunnel and freight traffic between Dover and Calais. Additionally, the Netherlands’ flight ban from the UK is expired this morning, and both France and the Netherlands now require a negative test result from travellers crossing the border. Meanwhile, headlines suggest the new virus strain may also already be in Germany, France and Switzerland. This may lessen the need for countries to keep borders closed, as long as travel remains restricted to commuters able to show negative Covid-19 tests. In terms of data, Italian manufacturing confidence, economic sentiment and the consumer confidence index all sharply rose since their November readings, indicating that markets are willing to look through the short-term risks of the resurgence in virus cases and remain hopeful of a recovery.
GBP
Sterling volatility continued in abundance yesterday as negotiations over Brexit and the UK’s access to trade with France due to the new Covid-19 strain continued. While the Dover port has reopened to lorry drivers that test negative for Covid-19, allowing trade to resume with the continent over the Christmas period, Brexit talks continued to hit hurdles in the form of fishing. It was reported that the proposed reduction in EU fishing vessels requested by the UK in a post-Brexit world was lowered from 60% to 30% in order to show concessions to the EU in order to garnish a deal. However, the EU rejected the proposal after they also moved their goalposts closer to an agreement, moving from 18% to 25%, but EU officials say that 25% is the upper limit. Both European Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson are continuing direct talks in an attempt to break the Brexit deadlock ahead of the December 31st deadline. Markets are awaiting news that the final hurdle - which takes the form of fishing quotas - has been cleared by negotiations, paving the way for domestic ratification of a deal before year-end. Sterling’s rally this morning on news that trading partners are reopening borders to UK travel and commerce is helping the pound retrace some of yesterday’s losses, but GBPUSD still remains off of yesterday’s opening price. To add to the UK’s economic woes, however, discussions today revolve around ministerial meetings which are set to discuss placing more of the UK in stricter tier 4 measures.