• Risk appetite deteriorated in the Asian session as tighter lookdown restrictions in Hong Kong unnerved investors.
  • Loose monetary policy combined with the prospect of further deficit spending could limit US Dollar potential gains.
  • The US Dollar Index (DXY) eyes yearly lows as price remains in a Descending Channel.

Tighter lockdown restrictions in Hong Kong overshadowed US fiscal stimulus optimism. Hong Kong’s Hang Seng index plummeted 1.32% Australia’s ASX 200 dropped 0.34% while Japan’s Nikkei 225 fell 0.44%.

In FX markets, the risk-sensitive AUD, NZD and CAD lost ground versus major peers while the safe haven USD and CHF advanced.

German, Eurozone and US PMI figures plus Canadian retail sales will be in focus

Stimulus Hopes to Weigh on the US Dollar

Loose monetary policy conditions and the prospect of additional fiscal stimulus dragged on the safe haven US Dollar.

President Joe Biden intends to push  $1.9 trillion in fiscal aid to support the US economy..

However, given the recent comments from several Republican members it appears unlikely that the full

With just 16.5 million Americans receiving at least one dose of the covid vaccine and weekly continuing jobless claims sitting around 5 million, additional support seems almost a necessity.

Treasury Secretary nominee Janet Yellen’s warned that not taking action “would likely leave us in a worse place fiscally”, comments which may encourage both sides to agree a deal.

The push for additional spending could undermine the Greenback against its major counterparts and ultimately drive the US Dollar Index (DXY) lower in the coming weeks.