- Stimulus Pullback Strengthens USD
- Euro Stable on Further QE Measures
- Vaccine Approval Could be Key Driver
The forex market dipped in early trading today in favor of the US Dollar. The move back toward the Dollar comes as it now looks increasingly less likely that the US will be able to push through any kind of stimulus agreement prior to the Presidential transition. At the same time, this has weakened both EUR/USD and GBP/USD markets slightly. The Euro though remains strong on measures the ECB has announced to further support the economy of the region. All eyes today will be on emergency approval for the Pfizer vaccine which has reached the final step of the FDA process.
New Stimulus Deal Runs Out of Road
There had been widespread hope of a new stimulus agreement being reached in the US that would further stimulate the economy with more than $900 billion. These hopes had been high early in the week as Nancy Pelosi commented on good progress being made. Those hopes have been dashed however as Senate Majority Leader Mitch McConnell has said that Senate Republicans will not support the bill to pass through the Senate.
This will likely boost the USD further for those forex trading but could have a strong negative impact elsewhere at a time when COVID-19 cases continue to run rampant across many parts of the US. This has also been reflected in the most recent jobless claim numbers which have spiked to their highest levels since mid-September.
ECB Remain Supportive of Euro
In a contrast of styles to their counterparts in the US, the ECB has pledged their ongoing support to the Eurozone economy with further expansion of the Pandemic Emergency Purchase Program to the tune of more than €500 billion. This should keep the economy operating in a positive way until the vaccine starts to roll out and life for business and people gets back to normal. That is the hope at least.
Forex brokers are likely to see continued strength in the Euro as a result of these fiscal measures and although ECB President Christine Lagarde has mentioned keeping an eye on the currency’s strength, there is nothing to suggest any intervention will occur to hold back the Euro despite efforts to boost inflation in the Eurozone, something that a strengthening currency can make difficult.
Positive Vaccine News Eagerly Awaited
With cases on the rise, no stimulus agreement apparently imminent, and unemployment numbers starting to reflect the recent spike in virus cases, restrictions, and business closure, the only thing that seems likely to cause a resurgence of positivity is vaccine approval. This could very well be how the week ends.
The vaccines from both Pfizer and BioNTech were recommended by an FDA panel for emergency use on Thursday. This is the final step before the overall FDA approval for emergency use that could see doses being made available immediately. This news is expected as early as today and could mark a huge turning point in fortunes against the coronavirus.
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