The Dollar is falling ; the Euro and the Pound will strengthen due to the european agreement

By Peter Nurse

The dollar was put under pressure Tuesday, the euro and the currencies linked to raw materials which have benefited from the news that the leaders of the european Union reached an agreement on a stimulus funds for the region, and in a context of hope for a vaccine Covid-19.

At 09h55, the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% in 95,718, after having reached its lowest level in more than four months to 95,687.

USD/JPY has risen 0.1 % to 107,31, while EUR/USD remained stable at 1,1444, after reaching a high of four months to 1,1469.

In relation to the currencies linked to raw materials, NZD/USD has slightly increased, and AUD/USD rose 0.4 % to 0,7039.

After more than four days of haggling, the leaders of the european Union reached an agreement on a recovery plan massive € 750 billion to their economies affected by the coronavirus, including 390 billion euros in the form of non-repayable grants – as compared to 500 billion, as originally proposed, and the remainder in the form of repayable loans.

“Investors will probably examine the package to the magnifying glass to search for the finest details such as the implied distribution and the share of loans compared to grants among the member States”, said the analysts of the Danske Bank, in a research note.

“Although an agreement has been concluded, we do not expect major changes, because the share price yesterday suggested that a lot of things have already been evaluated.

In addition to the weakness of safe-haven assets such as the dollar, encouraging data have been obtained in trials of three potential vaccines against the Covid-19, in which a candidate closely monitored by the university of Oxford.

In fact, the number of infections with the coronavirus in the world has exceeded $ 14.7 million, with more than 609 000 deaths, according to the latest data from the Johns Hopkins university.

The pound sterling has also shown its strength on Tuesday, with positive news from the EU summit as well as the resumption of the negotiations of Brexit, which will start later Tuesday.

The aim is to reach an agreement between the United Kingdom and the EU on future relations by October is ambitious but achievable, said on Tuesday the German foreign minister, Heiko Maas.

“There is a lot of leeway to incorporate more stress in the pound sterling in the weeks and months to come, as the negotiations on EU-Uk is entering a crucial phase – but we remain positive on the conclusion of a trade agreement”, said the analysts of ING (AS:INGA), in a research note.

At 09h55, GBP/USD rose 0.2 % to 1,2687, just off the highest level on a month of 1,2693 reached earlier, while EUR/GBP fell by 0.2 % to 0,9018, close to the lowest level of the week at 0,9015.

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