Despite starting the week strong, improved market sentiment is forcing the Dollar lower on Tuesday. The Dollar Index (DXY), which measures the currency against six major peers, dropped to as low as 96.450, down marginally on the day after losing 0.12% overnight. The Dollar “briefly approached 16-month highs at 96.914 last week” following the Federal Reserve announcement that they would be open to as many as three interest rate increases in 2022. On Monday however, the Dollar lost ground at the end of the session due to US Senator Joe Manchin saying he would not support President Joe Biden's ‘Build Back Better’ support package. Manchin, a “moderate” Democrat, is “key to passing a $1.75 trillion domestic investment bill” – thus his refusal to support the bill was negative for the Greenback.
The Pound also took a hit on Monday, after Boris Johnson said the government have reserved “the possibility of taking further action to protect the public, and to protect public health and the NHS”, noting that if necessary, the government “won’t hesitate to take that action”. Ministers have so far “pushed back against the prospect of new restrictions before Christmas” but indicated it’s more likely they will “be introduced… from Dec. 28”. Many suspect the new restrictions will “include a ban on households mixing indoors, as well as possible limits on the numbers who can meet outdoors and pubs and restaurants limited to opening outdoors only.
GBPUSD edged further away from the 1.32 handle on Monday, taking advantage of a weaker USD. Cable started the session at 1.3204 and closed the day at 1.3221.
GBPEUR in contrast made a loss on Monday. The pair opened at 1.1717 and closed at 1.1703.
EURUSD attempted to reclaim 1.13 yesterday but failed. The pair opened low at 1.1268 and finished at 1.1296.