Dollar firm as virus’ spread and stimulus stalemate raise caution

Forex Signals (Reuters) – The dollar found support on Monday, as surging coronavirus cases in Europe and the United States and a lack of progress toward a U.S. stimulus package put traders in a cautious mood, although hopes for a Brexit trade deal held sterling steady.

Against a basket of currencies (=USD), the greenback trod water in the Asia session, after having fallen broadly last week. Against the risk-sensitive Australian dollar and against the euro it gained about 0.2%.

Sterling , however, held firm at $1.3024.

The United States has recorded its highest ever number of new COVID-19 cases for two consecutive days and so has France. Spain announced a new state of emergency and Italy has ordered restaurants and bars to shut by 6 p.m.).

He said half-percent dip in S&P 500 futures (ESc1) had spilled over into currency markets, where traders are also in a cautious mood ahead of the U.S. election on Nov. 3.

FX Signals | Dollars bought as stimulus hopes

The Japanese yen slipped a fraction on the firmer dollar to 104.85 per dollar and other Asian currencies also traded a touch lower.

Hopes for a breakthrough in the trade-deal stalemate between Britain and Europe held the pound steady above $1.30.

Over the weekend, Britain’s Northern Island minister said there was a good chance of a trade deal.


The week ahead holds three major central bank meetings and the final sprint to the polls in the United States.

The Bank of Canada and Bank of Japan are expected to hold fire for now, while the market assumes the European Central Bank will sound cautious on inflation and growth, even if it skips a further easing on Thursday.

Dollar loses out on growing optimism about virus vaccine

“The risk is that ECB President Christine Lagarde strikes a dovish tone during her post-meeting press conference,” said Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Joe Capurso.

“If President Lagarde emphasises the downside risks facing the Eurozone economy, the counter-cyclical dollar can rise.”

Analysts also reckon that a Joe Biden victory next week, especially if the Democrats win control of the Senate, would likely herald a large U.S. stimulus package. But investors are treading carefully.

“I think that the dollar is now as polarised as it gets,” said Diego Parrilla, chief investment officer of Quadriga Igneo, a fund designed to profit in market turmoil.

Forex Signals – Asian currencies on recovery

“On the one hand, we have a very clear will from the Fed and the U.S. government to print and borrow their way out of the problem,” he said, weakening the outlook for the dollar.

“But it’s almost like the more consensus you get and the bigger the position, you will see also big reversals, and my personal view is that the dollar remains a good thing to own during periods of stress.”

Elsewhere, China’s top leaders chart the country’s economic course for 2021-2025 at a key meeting starting on Monday, and may adopt a lower or more flexible growth target.

The yuan , which has soared more than 7% since May as China has led the world’s recovery from the COVID-19 pandemic, edged lower with the broader mood to 6.6852 per dollar.

Why trade CFDs on currency pairs?

Later on Monday, investors are watching for a German sentiment survey at 0900 GMT, following a robust Purchasing Managers’ Index figure last week, and U.S. housing data, due at 1400 GMT.

Dollar firm as virus’ spread and stimulus stalemate raise caution

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