Dollar Down Over Stimulus Stalemate and Pandemic Woes 

  • 16
    October, 2020

    The dollar was down on Friday morning in Asia, continuing a downward trend despite investors turning to safe-haven assets over ever surging number of global COVID-19 cases and the U.S. Congress’ continuous stall on passing the latest stimulus measures ahead of the Nov. 3 presidential election 

    The U.S. Dollar Index inched down 0.03% to 93.832 by 10:30 PM ET (2:30 AM GMT). However, the dollar saw its largest weekly rise since late September as it has gained 0.8% so far during the past week. 

    Europe and the U.K. implemented fresh restrictions to curb the spread of the virus, and the number of cases in the U.S. Also rose, with Midwestern states battling a surge of new cases as temperatures drop. 

    The spike in cases on both sides of the Atlantic triggered fears of fresh lockdowns and worries over the detrimental impact on economic recovery. 

    “Markets fear a slowdown in activity as new virus cases rise … the deterioration is evident everywhere across Europe, which is a major blow to the recovery’s momentum and reinforces deflationary risks,” ANZ bank analysts including Susan Kilsby and David Croy said in a note. 

    With 898,000 Americans claiming unemployment over the past week, higher than the 825,000 claims forecast and hitting a two-month high, the data suggested bumps ahead in the road to recovery. 

    “The data is consistent with the idea that the spread of COVID-19 and removal of fiscal stimulus have seen a stalling of the economic recovery,” NAB FX strategist Rodrigo Catril told Reuters.  

    Meanwhile, the stalemate over the stimulus measures continues, with Senate Majority Leader Mitch McConnell rejecting an offer by President Donald Trump to raise the price tag on this $1.8 trillion offer. 

     

    TECHNICAL OUTLOOK 

     

    In the daily charts of GBP/USD, the pair inched lower on Friday morning in Asia session. 

    The GBP/USD pair edged down 0.19% to 1.2889. Roadblocks between the European Union (EU) and the U.K. as they negotiate their Brexit divorce deal saw heavy selling in the pound overnight. U.K. Prime Minister Boris Johnson is due to respond to the EU’s demand for the U.K. to make compromises or prepare for trade disruptions in less than 80 days, later in the day. 

    As the end of the trading week nears, we can see that the pair is reaching for the support at 1.2688. Further confirmation for the pair breaking past the support level will strengthen the position of Sterling bears against the dollar in the coming week. 

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