The U.S. dollar weakened on Wednesday morning. That means the currency is hovering near its lowest level in two and a half years due to optimism that stimulus talks will resume. The USD index fell slightly by 0.16% to 91.14 and was the lowest level since April 2018.
Steve Mnuchin and Nancy Pelosi (House of Representatives Speaker) held their first talks. They discussed the latest stimulus measures since the November 3 presidential election. Mnuchin also considered some of the points proposed by Nancy in some of her meetings.
One of them is a $908 billion fund set up by a bipartisan group of senators and House members. This was conveyed by Pelosi some time ago. Meanwhile, Senate leader Mitch McConnell said that Congress should include new measures in the $1.4 trillion spending bill.
Purposes of the Stimulus
The stimulus provided aims to stop the government shutdown in the midst of COVID-19. McConnell also discussed a revised version of his own plan to the party of fellow Republicans on the same day. However, some investors are not convinced that such talks will generate consensus.
Currency markets are skeptical whether this proposal can be agreed upon quickly. This is because expectations were shattered when the stimulus package could not be realized before the presidential election. They are constantly looking for convincing clues that a deal can actually be reached soon.
The statement was provided by Mizuho Securities chief currency strategist Masafumi Yamamoto to Reuters. U.S. Federal Reserve Chairman Jerome Powell expressed his cautious move during a hearing before the Senate Banking Committee. He warned that the U.S. economy remains in a state of repair and uncertainty.
Powell and Mnuchin also urged Congress to provide more assistance to small businesses amid the soaring coronavirus pandemic. It is also important amid concerns that help from vaccines may not arrive in time. This step can be a preventive solution so that they do not fail.
Next Meeting Agenda
Powell will testify before Congress again and the Fed will also meet for a policy meeting on December 15 to 16. Weaker manufacturing activity data is possible, including the ISM Manufacturing Purchasing Managers' Index (PMI). The situation comes amid speculation about the Fed's move.
The point is whether the Fed will move to support the U.S. economy before the COVID-19 vaccination is available or not so it won't weigh on the dollar. Elsewhere, the USD/JPY pair rose 0.09% to 104.39. The AUD/USD pair is also increased by 0.18% to 0.7382.
The AUD got a boost from data released by the Australian Bureau of Statistics the previous day. It showed that GDP grew 3.3% quarter-on-quarter. The figure is above the 2.6% growth in forecasts prepared by Investing.com. Furthermore, a 7% contraction in the second quarter has occurred.
GDP shrinks by 3.8% year-on-year. That condition is above the 4.4% contraction forecast and the 6.3% contraction reported in the second quarter. In addition, the Reserve Bank of Australia kept its December interest rate at an unchanged rate of 0.10%, as many had expected.
Currency Development in Society
The NZD/USD pair reported a slim rise of 0.07% to 0.7068. The figure hovers near its highest level since April 2018 and was seen overnight. Elsewhere, the GBP/USD was currency edged up 0.06% to 1.3422. The pound remains near its highest level in three months.
British and EU (EU) negotiators are working to reach a Brexit trade deal before the following week. Although the talks have reportedly had a way out, there were warnings on Tuesday that the talks remained deadlocked. This is especially so for some important points.
Examples are about issues such as fishing, governance rules, and dispute resolution. Those points are seemed too hard to get the deal. It is hoped that a solution will be found soon so that there will be no disputes after Brexit.
