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USD is back with a vengeance after a long period of decline. Upbeat US Non-Farm Payrolls may have supported the world’s top currency early in the week and now it is the lack of progress in Washington that can be mostly attributed to the greenback’s advance. King dollar’s comeback seems unstoppable, according to FXStreet’s analyst Yohay Elam.

Key quotes

“While Republicans and Democrats are willing to resume negotiations on the next fiscal package, they have yet to set a time for talks. Moreover, President Trump’s executive orders are not only failing to urge lawmakers to act – they may be useless. Most importantly, federal unemployment benefits – decreed at $400/week – are conditioned on $100/week from states. However, states’ high debt levels may prevent such support. Moreover, it is unclear if executive action has legal standing.”

“Trump seems enamored with the power of the pen, and he is touting a capital gains tax cut – reversing his position. While that is boosting stocks, it does not diminish flows to the safe-haven dollar. Lower US fiscal spending means a stronger dollar.”

“Another boost to the greenback comes from the latest US coronavirus figures – cases fell below 50,000 per day in Monday’s reporting. While the most recent decline is attributed to the ‘weekend effect,’ the trend is clearly to the downside. That contrasts with the trend in the old continent, which is to the upside. Overall, Europe’s coronavirus situation is currently far better than America’s but the direction of travel is changing.” 

“Sino-American tensions remain elevated. Trump said that the trade deal ‘means very little’ to him. Investors have been able to shrug off worsening relations, but are sensitive to the trade deal. So far, they are taking Trump’s words as bluster, but if the accord falls apart, stocks may stumble and the safe-haven dollar has room to rise.”