The U.S. dollar was mixed throughout the week, but closed as a net loser as weakening U.S. data and the Fed’s promise of low rates for longer-term were the main drivers that kept the bears in control.
United States Headlines and Economic data
No major data or news from the U.S. during the Monday session, but the Greenback drifted lower against the majors. This was likely driven by rising risk sentiment as U.S. equities recovered from recent weakness and possibly on positive COVID-19 vaccine related headlines (news of AstraZeneca resuming its phase three coronavirus trials). It’s also likely traders were positioning for a potentially dovish FOMC statement later in the week.
Fed vows to keep rates near zero until inflation tops 2%, likely keeping meager rates 4 to 5 years – financial markets went into risk-off mode after the FOMC gave no indication of increased stimulus measures as expectations of economic contraction will not be as extreme as originally thought (Fed 2020 GDP estimates improves to -3.7% vs. its June estimate of -6.5%, Unemployment rate projected at 7.6% by end of year vs. the previous estimate of 8.4%)
The Greenback’s rally begins to lose its luster during the Thursday Asia session, possibly on counter currency flows as the turn correlated with the weak but better-than-expected reads on Australian employment and New Zealand GDP.
We saw some gains for the Greenback during the U.S. session as risk sentiment shifted negative ahead of the weekend. This was likely on a combination of scenarios ranging from a low expectancy of a new stimulus package from the U.S. government, the possibility of the U.K. locking down once again, and as the U.S. tech sector continued to fall)