USD/CAD

Greenback Drops Lower, Investors Pullback amid Surging COVID-19 Cases

Optimism concerning the COVID-19 vaccine progress has helped many currency traders and global investors dump safe-haven assets amid US-China tensions and rising virus cases seem to have little effect on dampening the mood for now.

The U.S dollar index that monitors the greenback against a bouquet of other currencies lost about 0.42% to 95.805 by 01.39 GMT.

The U.S dollar fall could also be attributed to investors continuing the previous session’s pullback from the U.S dollar as data recently released showed an increased U.S. inflation.

On the flip side, the Euro has been gaining grounds despite not seeing a sharp a jump in business confidence survey. However, the surge in the Euro could be contributed to the fact that the Europeans have controlled the virus spread better than the Americans,

“Germany, France, and Italy have all taken severe lockdown steps and as a result, the coronavirus now appears to be under control. The economy could be gradually recovering,” said Bart Wakabayashi, Tokyo Branch Manager of State Street Bank and Trust.

A U.S Federal Reserve Official went further endorsing yield-curve control, which would set the greenback up for a broad-based weakness and while boosting the price of gold upward.

The market is pricing low rates for longer in US rates front end. In addition to QE, the Fed could use yield curve control, focusing on 3y tenor, which is holding nominal and real returns down in any case.

However, the U.S dollar could reverse the downward momentum if positive macros such as a much better-than-expected high-frequency US leading businesses but given the recent upside in COVID-19 cases, many currency traders would remain on d sideline, based on strengthened geopolitical uncertainty.

For a look at all of today’s economic events, check out our economic calendar.