EUR/USD: US dollar is showing weakness, but the euro is not happy with it

The market is worried about the dynamics of the EUR/USD pair during the middle of the final week of the current year. Many experts talked about the US dollar's weakness, but at the same time they hoped that the euro would strengthen. However, analysts say that the weakness of the dollar is unlikely to help the euro this time.


Today, the US currency weakened significantly against other global currencies. Experts have recorded a drop in the dollar index (DXY) by 0.2%, to 90.368 after slightly rising (by 0.66%, to 90.546) the day before. The US dollar was supported by the short-term surge in demand for protective assets, but luck turned away from it again. On Wednesday morning, the EUR/USD pair traded near the level of 1.2183, but tested the range of 1.2191-1.2192 a little later.


Market participants are still mainly focused on the difficult situation with the new strain of COVID-19 discovered in the UK. Experts fear that the new virus strain will "spread" to other European countries, primarily Germany and France. On another note, they consider the economic situation in the US relatively stable, where the final data on GDP for the third quarter for this year were published. During the reporting period, this indicator increased by 33.4%, which exceeded experts' forecast by 0.3 percentage points (pp). However, this did not positively affect the US dollar.

Analysts believe that the US Congress, approving the new stimulus package, led to investors' profit-taking. Experts emphasized that this contributed to the dollar's further decline. At the same time, Donald Trump's statements about his unwillingness to sign the new fiscal stimulus bill, which provides for the allocation of hundreds of millions of dollars to foreign states for purposes not related to the fight against COVID-19, is another factor that contributed to it. Instead of doing so, the still incumbent US president has demanded that lawmakers amend the bill to increase payments to Americans.

According to the analysts of Trading Economics, the adoption of the next package of fiscal measures by the US authorities and the expectation of the emergence of effective vaccines for COVID-19 support investors' optimism about the prospects for the global economy in 2021. However, experts stressed that the current situation does not favor the growth of the US dollar. Moreover, its weakness does not add optimism to the Euro, which is also under pressure from negative factors. According to analysts polled by Reuters, USD will continue to decline until the middle of next year. Experts sum up that the demand for risky assets will remain high if this scenario actually happens.



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