The U.S. dollar was marginally lower in early European trade Friday, as traders looked past the resurgence in coronavirus cases around the globe and the need for a safe haven, focusing instead on the likelihood of more financial stimulus ahead.
At 3:05 AM ET (0705 GMT), the ICE (NYSE:ICE) Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 96.215. EUR/USD gained 0.1% to 1.1391, GBP/USD gained 0.1% to 1.2556, while USD/JPY was down 0.1% at 107.17.
There are over 13.7 million Covid-19 cases globally as of July 17, according to Johns Hopkins University data. The U.S. recorded at least 75,000 cases over a 24-hour period on Thursday, Brazil surpassed the 2 million mark, while India topped 1 million cases.
Against this backdrop, the euro has shown strength, with EUR/USD up 0.7% over the last week. Europe as a whole has been seen as handling the virus pandemic well, a spate of small outbreaks notwithstanding, while European Union leaders meet in Brussels seeking to overcome their differences over a proposed stimulus package.
“For this weekend, a political agreement on the basic principles of a European Recovery Fund is still feasible, although the final stamp of approval may need another round of negotiating as it will involve lots of horse-trading, including the negotiations on the European budget,” analysts at ING said in a research note. “A deal now would be huge, but any sign of further progress on the remaining contested issues would also still be positive,” ING added.
Additionally, with some U.S. Covid-19 stimulus measures due to expire at the end of July, Congress is scheduled to debate further measures next week.
Investors are counting on the pressure of upcoming elections in November to push U.S. policymakers into adopting more stimulus measures as the world’s largest economy struggles to contain the epidemic.
Elsewhere, USD/CNY pushed 0.1% higher to 6.9979, as tensions between the two global superpowers continued to sour.
The past week has not been a good one for U.S.-China relations, with the U.S. disputing Chinese claims in the South China Sea and President Donald Trump removing Hong Kong’s special trade status as well as approving initial sanctions against Chinese entities involved in enacting Hong Kong's national security laws.