Dollar Weakens, Vaccine Optimism Grows

The dollar continued to head lower in early European trade Wednesday, with traders deserting the safe haven as U.S. lawmakers make progress toward a Covid-19 relief package ahead of the Federal Reserve meeting.

USD/JPY fell 0.2% to 103.44, EUR/USD rose 0.2% to 1.2170, trading near a 2 1/2-year high of 1.2177 touched on Monday, while the risk-sensitive AUD/USD was up 0.1% at 0.7564, near the June 2018 high of at 0.7580 seen on Monday.

Support appears to be growing in Congress for a slimmed down proposal to help ailing businesses and households during this surge in Covid-19 cases.

A bipartisan group had originally proposed a $908 billion stimulus bill, but this has now been split into two parts. The first part, which includes a $748 billion proposal, including aid for vaccine distribution and unemployed benefits, appears to be gaining traction, and could be passed by the end of the week. The second part, a $160 billion bill for state and local support and temporary Covid-19 liability protection, appears to be having more difficulty in gathering the necessary support.

Elsewhere, GBP/USD rose 0.2% to 1.3488, climbing towards the 1.3540 level seen earlier this month, a level not seen since mid-2018, amid optimism that a Brexit trade deal can be agreed.