The falling trend of the US Dollar has started since March 2020 and still continues to fall day by day. There are several factors that contribute to the weakness of the US Dollar, among them is due to the Covid-19 pandemic situation. The United States was the worst hit by the pandemic, forcing the U.S. government to make drastic changes in its fight against the economy.
The Federal Reserve made drastic decisions by focusing on weak monetary policy to stimulate the severely affected economy. Interest rates dropped sharply to 0.00% - 0.25%, weakening investors and traders' confidence in the US Dollar.
At the same time, optimism over the emergence of the Covid-19 vaccine has also not helped to strengthen the US Dollar so far. During November 2020, the dollar index, which measures the strength of the US Dollar, fell by 2.4%.
When compared to other currencies, major currencies such as the Pound Sterling, the Euro, and the Canadian Dollar recorded an increase against the US Dollar. The GBP / USD pair traded at $ 1.3340 today, a significant increase for 2020. The EUR / USD pair also showed a similar uptrend and is currently trading close to $ 1.20.
In terms of activities in this week's economic calendar, the focus will definitely be on December 1, 2020 where FEDS Chairman J. Powell will give his speech on the current economic situation and monetary policy at Capitol Hill. Apart from that, some economic data that will be published on December 3 such as Initial Jobless Claim and ISM Services PMI also stole the spotlight.
Lastly, on December 4, the Non-Farm Payrolls data report will be published together with the Trade Balance report which will definitely have a big influence on the strength of the US Dollar for December 2020.
---------------------------------------------AHMAD FAIZUDDIN BIN RAZALI
CHIEF ANALYST OF CDG GLOBAL