News that US President Donald Trump has returned to work in the White House after being treated for COVID-19 has supported the recovery of stock markets and put pressure on the safe greenback. The USD index sank more than 1.2% from two-month highs in late September.
Risk appetite has also been fueled by renewed confidence that US lawmakers are close to reaching a compromise on a new stimulus package for the national economy.
According to White House chief of staff Mark Meadows, lawmakers in Washington may still agree on additional economic stimulus, and Trump is determined to achieve this, especially in the run-up to the November 3 presidential elections.
House Speaker Nancy Pelosi and US Treasury Secretary Stephen Mnuchin held another round of negotiations, but there were no signals that the parties were close to an agreement.
At the same time, Trump's discharge from the hospital raised questions about both his condition and his readiness to comply with restrictions to contain the further spread of COVID-19 in the White House.
"Donald Trump's illness will most likely not affect the results of the presidential elections. However, the increased likelihood that Joe Biden will win the election and the Democrats will take control of the Senate will exacerbate the weakening dollar, "- said experts at The Goldman Sachs.
"Meanwhile, events that speak in favor of Trump's re-election should support the greenback," they added.
The only significant data from the US this week will be the minutes from the September FOMC meeting on Wednesday. Last month, the Fed made its position clear. Given that inflation is still below the 2% target and unemployment is at a historically high level, the regulator does not plan to raise interest rates for at least another three years. Many analysts believe that the forthcoming FRS protocol will strengthen the dovish sentiment of the Central Bank, which will be more negative than positive for the greenback.
At the same time, the main driving force of the dollar will be news about the state of health of US President Donald Trump, as well as progress or lack thereof in negotiations on a new stimulus package between Republicans and Democrats.
The EUR / USD pair has broken through the upper boundary of the range 1,1700-1,1770 against the background of upwardly revised figures on business activity in the euro area last week. In September, the region's composite PMI reached 50.4 points against the forecast of 50.1 points. However, experts warn that the recovery of the European economy in September has almost stopped.
"The likelihood of another downturn in the fourth quarter has clearly increased," IHS Markit said.
In addition, "There are concerns that instead of a V-shaped recovery, we will get a more volatile rebound." as per ECB President Christine Lagarde.
"Until recently, the EUR / USD pair traded between 1.1780 and 1.1790 (trend line and 55-day moving average), but then dipped lower. Strong support remains at 1.1612, and a break below, if any, will bring the 1.15 target back into the bears' focus," strategists at Citigroup said.
They also added that "the likelihood that the main currency pair will break the resistance at 1.20 in the medium and long term remains high, especially since real interest rates in the US are unlikely to rise significantly given the new FRS mandate."
"By the end of the year, a number of factors will climax, including progress on US fiscal stimulus, Brexit, and the coronavirus. If all goes well, the euro could test the $ 1.20 mark. Until a radical change occurs in these matters, the EUR / USD pair will be trading in the range of 1.15–1.19, " the Danske Bank believes.
