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The dollar cannot with so much pressure: Covid, tensions with China … and now more unemployment

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Week to forget in the dollar, which has suffered like never before due to the pressures it faces. On the one hand, the incessant increase in the spread of coronavirus in the USA, which is putting the economic recovery at risk. On the other, the increase in tensions between Washington and Beijing, increasingly worrying. And now you must also face the unemployment rise in United States. All this has led to falls in the currency, compared to the advance experienced by the euro thanks to the Recovery Fund agreement reached by the EU. Such is the situation that some experts already believe that "the euro could be a formidable alternative to the dollar."

This is pointed out by analysts at Bank of New York Mellon, who say that while the euro has received a strong push thanks to agreement on EU fund, which will help European economies recover from the consequences of Covid-19, in the US the political remedies that are being put into the pandemic "continue to be worrisome". And, in addition to everything already mentioned, the dollar must also endure the ups and downs of the debate between Democrats and Republicans about the new stimulus package that is being prepared.

After days of negotiation, there is still no agreement, and time is running out. And is that the difference between one and the other is very large. While Congress, led by Democrats, approved a $ 3 trillion package, the Republican-controlled Senate has come up with an alternative of just $ 1 trillion.

At Rabobank they agree with this point of view, noting that "the fundamentals behind the euro have improved since spring" and, although this trend is due to the fact that the common currency "has remained firm against the dollar", it cannot be denied that the community currency "has received an additional boost" thanks to the agreement of the Twenty-seven. And just at the moment when the dollar is weaker. "The dollar is firmly in decline," and "the burden is being led mainly by the euro," analysts at the Dutch entity say.

But, according to TD Securities, before the Uncertainty caused by the US-China tension in the markets, which has once again raised doubts about the trade agreement at a more than delicate moment, since in November the elections to the White House are held, the big question to ask is "if other currencies (or gold) offer a more attractive value than the dollar in times of stress like today. "

In fact, this firm appreciates a change in trend, with "the euro acting as a safe-haven currency and procyclical in the midst of shock, "which is why he believes that" the EU agreement could reinforce these properties of change "in the European currency" while the narrative of US exceptionalism decreases, "which will affect the dollar. , he says, "given the collapse of real rates and strong valuations," the greenback "needs growth and actions to propel it forward" that they do not see in the short term. "We have constantly revised our forecasts for the USD downward . We see a lot of euros in the coming quarters"analysts at TD Securities point out.

GREAT WEAKNESS OF THE DOLLAR

"The euro has taken advantage of the great weakness of the dollar by adding the unemployment claims in the US to all concerns regarding the increase in coronavirus cases and to a revival of tensions with China"they point out from Monex Europe. In eToro they also talk about weakening of the greenbackThey point out that the falls "are stimulating investments in areas of the market that become good value as the main world currency decreases."

Experts at this firm refer to precious metals as gold and to US Treasuries, which "have risen with the weakening of the dollar," as foreign investors "take advantage" of the fall in the US currency.

And at Robeco they also analyze the strength of the euro against the dollar. In her latest report, entitled 'A push to bring up value in the euro', the manager says that the EU Fund will give a push to the common currency, which could be appreciated, because it has put the "prospects for fiscal integration ". "The resurgence of the euro could be greater against the dollar", and for this reason, Robeco's multi-asset team has positioned itself long in the euro against the greenback.

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