US dollar undermined by US election and coronavirus vaccine

2020/11/19 08:42:43 Written by Canarian Weekly Business

The US dollar experienced notable volatility over the past couple of weeks largely as a result of US election drama. During this time we’ve seen GBP/EUR climb from 1.10 to 1.11, whilst EUR/GBP has slipped back to 0.89. Meanwhile, GBP/USD has rallied from 1.29 to 1.31, at the same time that EUR/USD has jumped from $1.16 to $1.18.

After fluctuating wildly amid the US election drama, the US dollar ultimately fell back through the first half of November, striking a two-month low as confirmation of Biden’s victory and news of a potential coronavirus vaccine undermined demand for the safe-haven currency.

While this slump in the US dollar has helped to bolster the euro due to the negative correlation in the world’s most traded currency pairing, the euro’s gains have been capped somewhat by concerns over record surges of coronavirus cases throughout Europe and the potential impact on the Eurozone economy.

Meanwhile, the past couple of weeks have seen the pound make some steady gains, with Sterling sentiment buoyed by vaccine hopes and cautious Brexit optimism.

Looking ahead, we are likely to see coronavirus concerns continue to dominate market sentiment, which will bolster the safe-haven appeal of the US dollar, whilst weighing on the euro due to Europe’s status as the epicentre of the second wave of infections.

Meanwhile, GBP investors will remain focused on Brexit as the UK and EU enter the final stretch of trade talks, with the pound likely surging if the two sides are able to finalise a trade agreement.

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