After an eventful week last week, dollar weakness continues as the current risk-on mood drives the greenback lower. With the latest news coming from AstraZeneca only increasing the risk-on mood. The pharmaceutical firm announced it will soon be starting a 50,000-strong Phase 3 of its coronavirus vaccine.
The underlying driver of the dollar’s weakness last week was the Fed’s dovish shift on inflation. Richard Clarida, Vice-Chair of the Fed, played down additional policy steps such as Yield Curve Control or negative rates. Nevertheless, this did little to help the dollar, and the prospects of long-term lower rates are weighing on the greenback.
EURUSD today is trading at nearly a 2 year high, with 1.20 in clear sight, On Friday, the pair was still only at 1.1888. By the time of the close, the pair had managed to break the 1.19 handle and close off at 1.1901.
This dollar weakness has also allowed cable to reach fresh highs. On Friday, GBPUSD started off the day strong at 1.3275, only to go on and close at 1.3339. This rise has continued since Friday – cable is now trading above 1.34, which is the highest since December.
Even though this has been argued in the senate for weeks now, another driver of a weaker dollar is the inability for the Senate to come to an agreement on US Fiscal Policy. Talks between Democrats and Republicans remain at a standstill according to both sides, with aid to states remaining the main sticking point. The political background is President Donald Trump's narrowing of the gap against rival Joe Biden, attributed to anger over unrest in various cities. For some market participants, the deadlock in Washington implies additional monetary support down the road.
With the US taking most of the recent limelight, and little being released on Brexit, GBPEUR has been somewhat rangebound for weeks. On Friday, after opening at 1.1165, managed to climb above 1.12 and find support and close at 1.1208. As the session starts today the pair is trading just below the 1.12 mark.
On the data front, today we have Manufacturing PMI reports being released from Germany, Eurozone, UK, this morning and from the US this afternoon. Also, from the Eurozone, Core Inflation Rate Flash for August at 10:00.