On Wednesday, pressure increased against the U.S. dollar, which reached its lowest level in more than a week, as stricter economic restrictions across Europe and the United States tested the market’s optimism over vaccine news. Most notably, the US Commerce Department released its retail sales report, showing that spending had decelerated, even though the holiday shopping season was approaching, and there was no fiscal stimulus relief from Washington. The dollar reached its lowest level against a basket of currencies at 92.250, which is the lowest it has been since November 9th. Analysts said that the disappointing retail sales data and the surge in the coronavirus cases had caused the greenback to drift lower overnight.
The analysts said that all eyes would now be on the Federal Reserve meeting scheduled for December, because further easing was expected, which would only pressurize the dollar even further heading into 2021. Jerome Powell, the Chairman of the Federal Reserve said on Tuesday that they had a long way to go before they could achieve economic recovery. Often regarded as a safe-haven asset, along with a hedge against inflation, Bitcoin saw its value exceed the $18,000 mark, a milestone that it was able to reach for the first time in three years.
The safe-haven Japanese yen also hit a one-week high because of the uncertainty regarding global economic recovery. The yen reached the same levels it had achieved on November 9th, at $103.85, which helped the currency in recouping most of the losses it had suffered in the previous week after the announcement by Pfizer regarding an effective coronavirus vaccine. The euro reached $1.1881, after surging by 0.2%, as investors didn’t seem worried about Poland and Hungary blocking the 1.8 trillion euro fiscal package, worth $2.14 trillion, by the European Union for reviving an economy that has been damaged by the COVID-19 pandemic.
Analysts said that it was likely that with a summit planned in December with physical presence, the European Union would be willing to accept a compromise regarding breach of the rule of law, allowing both countries to save face and accept the EU recovery fund and budget. Hence, there wouldn’t be any reason to sell the euro. Warsaw and Budapest had vetoed the recovery fund worth 750 billion euro and the EU budget worth 1.1 trillion because the budget law had a clause that makes access to the money conditional on following the rule of the law.
As far as Brexit is concerned, Alok Sharma, the UK Business Secretary said that Britain was hoping to reach an agreement about a trade deal, but the European Union needed to understand that it was now a sovereign nation. This statement came after reports that British Prime Minister Boris Johnson had been informed by British negotiations to expect a trade deal in the next week, with a potential landing zone on Tuesday. Sterling increased by 0.3% in the morning and within striking distance of values unseen since the beginning of September.