Weakening US Dollar lifts its riskier counterparts, yet Europe’s slow vaccine rollout pressures Euro to fluctuate

• US Dollar weakens amid rising optimism, lifting its riskier counterparts
• EURUSD remains steady as industrial production falls below forecasts but trade surplus managed to offer some support
• JPY moves up with stronger momentum as USDJPY reached above 105

US Dollar is near two-week lows on Monday, as optimism on the COVID situation grows, supported by smooth and speedy vaccine rollouts. The weakening dollar has boosted riskier currencies, stock markets, and commodity prices. Among all the major counterparts, the British Pound broke $1.39 for the first time in almost 3 years, Norwegian crown and Australian dollar all reached their highest levels in the past 3 weeks. Additionally, offshore Chinese yuan continues its rising trend and is currently very close to break the 6.40 level. In the futures market, speculators maintained their short position over USD. Per latest data from the US Commodity Futures Trading Commission, net short value on the Dollar is standing at $29.53 billion.

Despite weakening USD, EURUSD stays steady, currently fluctuating around $1.21. The recently published December’s Eurozone industrial production data shows that, production fell by 1.6%, revising a 2.6% increase in November. Previously economists had forecasted a 1% decline. However, EUR managed to find some support from the trade data. In December, trade surplus widened from €25.7 billion to €29.2 billion, beating the forecast at €25.3 billion. This has helped balance EURUSD a little bit. In the mid-term, Europe needs to speed up the vaccine rollout or else investors would worry about the potential extension on lockdowns.

In the past few weeks, we are also seeing a stronger movement from the Japanese Yen. Earlier last week, Yen gained 0.63%, marking the strongest one-day gain since last November. This week, Japan is expected to start its vaccination program and hopefully it will bring some energy back to the local economy. Analysts at Goldman Sachs comment that, given Japan’s strong performance at the end of 2020, economy is likely to rebound reasonably promptly. Analysts also expect that global growth should be strong over the next 6 months as more countries start to deploy vaccines.