US Dollar Weakens as Markets Hope for a Brexit Deal Soon

US Dollar Weakens as Markets Hope for a Brexit Deal Soon

Posted Thursday, December 24, 2020 by
Arslan Butt • 1 min read

The US dollar is trading somewhat bearish on Thursday amid thin liquidity in global markets ahead of the year-end holidays, driven lower by rising expectations for a narrow trade deal being finalized between Britain and the EU soon. At the time of writing, the US dollar index DXY is trading around 90.19.

On Wednesday, the DXY weakened by 0.3% even as its major peers EUR and GBP made gains over hopes that Britain and EU’s negotiations could soon result in the announcement of a trade deal before the end of the Brexit transition period on December 31. The risk-on sentiment in the markets has also helped commodity currency AUD make gains against the US dollar.

Latest news reports suggest that both sides have already finalized a post-Brexit trade agreement, even though neither side has officially confirmed this news so far. British and EU sources maintain that discussions remain underway, but markets remain hopeful that a deal will be announced soon.

So far this year, the US dollar index has weakened by over 6% amid the Fed’s confirmation to maintain a dovish approach towards its monetary policy for an extended period of time, to help the US economy recover from the damage caused by the coronavirus pandemic. Analysts expect the weakness in the greenback to continue as traders move towards riskier stocks and emerging market currencies.

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