Dollar Weakens as Consumers Lose Confidence; Pound Gains on Possible Deal



© Reuters.

By Peter Nurse

Investing.com – The dollar edged lower in early European trade Wednesday, weighed by signs the surge in coronavirus vases is hitting the U.S. consumer while the country’s political scene remains divided.

At 3:55 AM ET (0755 GMT), the , which tracks the greenback against a basket of six other currencies, was down 0.2% at 92.245. climbed 0.2% to 1.1883, fell 0.3% to 103.91, while the risk sensitive rose 0.1% to 0.7304.

U.S. rose by just 0.3% in October, at the slowest pace in six months, while the previous month saw a downwardly revised 1.6% gain. This suggests consumers, who have driven the economic rebound, are becoming more cautious given the surging numbers of coronavirus cases in the country.

At the same time, the political partisanship in the U.S. shows few signs of changing after outgoing President Donald Trump fired Chris Krebs, who heads the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, accusing him without evidence of making a “highly inaccurate” statement that affirmed the security of the U.S. election. 

Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Tuesday asked Senate Majority Leader Mitch McConnell to resume talks on a multi-trillion-dollar stimulus package for the U.S. economy. However, it’s debatable what common ground can be found given the febrile nature of U.S. politics.

“Given the challenges Europe faces – in the middle of a second lockdown – EUR certainly won’t lead the rally against the USD, but we think the dollar decline is broad enough to drag EUR/USD back to 1.1920,” said analysts at ING, in a research note.

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Elsewhere, climbed 0.3% to 1.3276 after the Sun newspaper reported that a trade deal between the EU and the U.K. could arrive “early next week.”

“GBP seems a little tired of the stop-start nature of this news,” ING added, “but we would back cable on the soft dollar story and favor a rally back to recent highs at 1.3310.”

The currency could strengthen to $1.35 by mid-2021 if the two sides negotiate a free trade agreement, according to a Bloomberg survey of analysts, a level not seen since December 2019.

dropped 0.2% to 6.5442, with the yuan climbing to an almost 29-month high, helped by recent strong economic data, pointing to a robust economic recovery by the world’s second largest economy.

The Chinese yuan has gained nearly 9% against the dollar since late May, despite the central bank taking various actions to limit its strength.

 

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