After a one-day flat "reflection", the euro-dollar pair resumed its upward movement, currently approaching the borders of the 19th figure. The growth is primarily due to the weakness of the US dollar which was hit by a wave of sales throughout the market, as evidenced by the downward dynamics of the dollar index. The euro, in turn, withstood a blow from Hungary and Poland, whose representatives blocked the implementation of the EU budget. This fundamental background contributes to the further growth of the pair: it is only a matter of time before the 19th figure is stormed.
The US dollar which is a recent favorite in the currency market continues to weaken. There are several reasons for this dynamic. Against the background of a general decline in anti-risk sentiment, disappointing macroeconomic statistics were published in the US. Thus, the volume of retail trade in the country decreased to 0.3% (excluding car sales - to 0.2%) in October. For comparison, it is worth noting that in September, these indicators came out at 1.6% and 1.2%, respectively. The release not only reflected a decline in consumer activity but also came out in the red zone, falling short of the forecast values.
This suggests that the US economy continues to slow down gradually. Key macroeconomic indicators are increasingly disappointing, while the issue of accepting an additional aid package is still up in the air, due to the presidential and Congressional by-elections. Just last week, weak inflation data was published in the United States. The overall consumer price index slowed to zero in October, as did the core CPI.
The "Coronavirus Factor", which has been supporting the greenback for some time, is now playing against it – especially when it comes to the EUR/USD pair. The fact is that widespread lockdowns, which were introduced in Europe in early November, are already producing results. The second wave of the pandemic was managed, if not stopped, then at least "curbed". The rate of spread of the disease has slowed: the corresponding indicators have either leveled off (if the country has reached a plateau) or show a downward trend.
While the US continues to update its own anti-records. The daily incidence rate during the week is kept at the level of 150,000 - 170,000 – since the beginning of November, it has not fallen below the 100,000 mark. In the summer, when local outbreaks of coronavirus were recorded in a number of states in the US, the daily increase in infected people was at the level of 70,000 - 80,000 – and we are talking about peak periods. At the moment, the situation is more complicated. For example, just over the past day, 1,615 people died in the US (anti-record). During the same period, more than 157,000 cases were recorded in the country. More than two million Americans are expected to catch the coronavirus in the first three weeks of November, more than at the beginning of the epidemic. According to doctors, the spread of infection occurs in all age and ethnic groups, both in urban and rural areas. At the same time, in most states, the number of cases is growing even more rapidly than in the spring, when COVID-19 just came to the UnS.
For this reason, the governors of some regions are already resorting to new quarantine restrictions. In particular, California and Michigan have introduced a partial lockdown, and are currently considering a curfew. In Oregon, Washington, and New Jersey, the current restrictions were significantly increased. Many States still refuse to tighten the quarantine – but, according to experts, in the end, all regions of the country will be forced to take this step. Moreover, according to Bloomberg, the team of President-elect Joe Biden offers to save the situation with a nationwide lockdown, with partial compensation for losses to closed businesses.
Against the background of such prospects, as well as taking into account the uncertainty regarding the adoption of a new package of assistance to the Uba economy, the dollar is actively losing its position. After the congressional by-elections, the balance of power in both houses of the legislature remained the same: the House of Representatives is controlled by Democrats, the Senate by Republicans. Therefore, the issue of additional incentives will again be the subject of political negotiations. The previous negotiation process, which lasted several months (since May of this year), ended in nothing.
As you can see, the greenback is under pressure from several fundamental factors of a negative nature. The euro is also under some pressure, but it looks more attractive compared to the dollar, against the background of the weakening of the coronavirus crisis in the Alliance countries.
