$2.3 Trillion Covid Stimulus Package Drags US Dollar Lower

The $2.3 trillion Covid stimulus package was signed into law by President Trump on Sunday night, but the US Dollar moves lower against other currencies.

The Brexit deal that arrived last week was a relief to investors. The administration of the covid vaccine may support market sentiment for the GBP/USD currency pair.

The euro retreated from the 2 ½ year high levels of 1.2270 that it reached in December twice.

The coronavirus pandemic has re-emerged as a new variant and does not show signs of abating. Immediate measures are required to prevent an economic slowdown in the New Year, say analysts.

The coronavirus pandemic has brought a fall in the US dollar, by almost 10% this year, its worst performance since 2017.

US Dollar Lower After Signing of Coronavirus Aid Package

The pandemic aid signed by Trump averted a partial federal shutdown. He had earlier demanded a change in the stimulus aid, for an increase from $600 to $2,000, to benefit struggling Americans.

The bill was criticized as “wasteful spending” by Mr. Trump, who refused to sign the bill. It took months of negotiation for the $900 billion bill, to be approved by Congress. The $2.3 trillion package includes $1.4 billion towards federal government spending.

The bill was signed after much delay, by which many lost unemployment benefits temporarily. About 14 million Americans could not get their unemployment benefit payments and stimulus checks.

After Christmas, it was the holiday mood that kept away many investors. Monday saw very thin trading, and the dollar hovers at just above 90.20 levels. There is not much buoyancy in the greenback, with only a few investors trading the forex market this week.

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The US Dollar has been very volatile this year. The coronavirus pandemic has weakened the US economy. Major fiscal stimulus packages have been approved in the US, which has increased the money supply. Further, the pandemic effect and loss of life and jobs, have all contributed to drag the dollar almost 10% from its 3-year March 2020 highs.

US Dollar Drops 10% from March 2020 Lows

Euro Moves Towards 2 ½ year High Levels at 1.2300

Brussels is yet to decide on Britain’s access to its financial market.

After the deal was reached on 24 December, the UK parliament will vote on the trade deal on Wednesday. The Labour party has promised to support the deal and it is expected to pass, say experts.

A massive Covid-19 vaccination drive over the weekend has bolstered hopes of economic recovery in Europe. The vaccination campaign is launched across the 27 member states of the European Union.

The EUR/USD exchange rate has been moving ahead after the Brexit deal was signed. It shows great strength for the past few days with a target at 1.2300 levels, previously reached last week, which is also its 2 ½ years high. The EUR/USD currency pair reached 1.2500 levels, which it touched in 2018, and earlier in 2014.

UK Shut on Monday

The British market was closed on Monday for the Boxing Day Holiday.

The news of another infectious virus variant is creating alarm in England. Countries like France, Canada, and Japan have confirmed that the virus has spread to their countries too.

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Though the Brexit deal has been finalized, analysts criticize the bill as it does not cover the financial sector.

After the trade deal, Sterling moved towards the 1.3620 mark again. The GBP/USD touched this level previously on Monday, 17 December, and on Thursday, 24 December, twice this month, but has been unable to capitalize on the upmove. It moved lower to 1.34 51 on Monday, with the US dollar weakening and the spread of another virus infection.

GBP/USD moved higher to scale 1.3600 levels during trade on Christmas Eve. But the Sterling lost steam as the Brexit deal is already priced in, and the currency pair moved lower to 1.3450 levels.

Precious Metals Rise with Weaker Dollar

Precious metals like gold and silver rose to a one-week high aided by the weak dollar, after the pandemic aid bill was signed by President Trump.

The US dollar weakened, while gold and bitcoin saw an increase. Global share markets rose with the signing of the $2.3 relief package and the trade deal clinched between the UK and the EU.

Bitcoin shot up to $26,876 with the decline in the US dollar. The cryptocurrency soared to a record high value of more than $28,000 over the weekend. The total value of the bitcoin in circulation has increased to more than $500 billion, with the weakening dollar.

Coronavirus Restrictions Increase with New Infectious Strain

The coronavirus infection is rebounding in a novel form. Many countries are imposing restrictions on travel. Just when movement restrictions are removed, a new mutant virus has been identified in the UK.

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Flights from and to England are restricted after the new viral strain was identified in the UK. France canceled freight travel to the United Kingdom. Japan is the latest to join the banning of visitors, which will continue through the end of January.

A continent-wide vaccination in the European Union, which is expected to improve health conditions in the eurozone. The vaccine brought by Pfizer Inc and BioNTech SE has gained approval by health regulators.

Global markets will be closed on Friday for New Years Day.

 

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