The U.S. dollar increased on Tuesday. Concerns about a new COVID-19 strain ragging in the U.K. has caused lockdowns and travel restrictions have weakened optimism about a U.S. stimulus bill that Congress passed overnight.
Additionally, U.S. stocks declined except for the Nasdaq, and U.S. Treasuries rallied. Risk-sensitive currencies such as the Australian and New Zealand dollars were also weaker against the U.S. dollar.
Furthermore, Tuesday’s data was weaker than anticipated. The U.S. existing home sales dropped more than foreseen in November, and the consumer confidence index lower than forecast. The weak U.S. reports strengthened the dollar’s rally.
Another essential thing to note is that an $892 billion coronavirus aid package that Congress passed is awaiting President Donald Trump’s approval to become law. Some analysts said the relief package already has a price in the market, and the impact has been muted.
Additionally, investors overall remained concerned about the new COVID-19 variant even as medical experts sought to ease concerns about it.
On Tuesday, the U.S. Centers for Disease Control stated that they did not detect the new COVID-19 variant in the U.S. At the same time, Health Secretary Alex Azar announced to Fox News the Pfizer/BioNTech and Moderna vaccines, which received U.S. emergency use permissions this month, should prevent the disease from the new variant of the virus.
Furthermore, the U.S.dollar index, in afternoon trading, increased by 0.6% and settled at 90.675. Meanwhile, the euro dropped 0.7% and touched $1.2156.
Against the yen, the greenback boosted 0.4% and settled at 103.70.
The greenback will remain under significant pressure for the first half of the year
According to managing director, global currency analysis at Action Economics in Florida, Ronald Simpson, the dollar will remain under significant pressure for the first half of the year. We have U.S. equities that are overvalued and overpriced. He also announced that there would be more opportunity in emerging markets as soon as the pandemic calms down.
Additionally, the British pound also declined by 0.9% versus the euro and settled at $1.3350. The sterling also dropped against the euro by 0.1% and touched 91.03 pence per euro.
As we all know, there is a post-Brexit trade deal still active between the United Kingdom and the European Union. While both sides want to finish negotiations before Christmas Eve, the talks remain strained.
The Australian dollar slipped by 0.8% to US$0.7525. Meanwhile, the New Zealand dollar fell by 0.7% and settled at US$0.7044.