• Yellen’s testimony pushes down USD and supports the EURUSD rally
• Kiwi rises as business confidence elevates
Dollar edged lower during Tuesday’s trading session, as the market focuses on Janet Yellen’s testimony as the US Secretary of the Treasury on Capitol Hill. As she steps into the new role, she is expected to outline Biden’s proposal of $ 1.9 trillion stimulus package, which she commented that the government must “act big.” Since 2021 USD has rallied nearly 2%, rebounding from sharp losses at the end of 2020, thanks to the rising yields. These gains, however, may not last too long as the market is expecting monetary policies to stay ultra-loose for a period of time.
As a result of this USD’s downward pressure, EURUSD has been pushed higher by the upbeat mood from Yellen’s testimony and potentially may also benefit from Biden’s inauguration soon. However, based on the recent statement made on Tuesday from the European Commission, it will actively seek to boost Euro’s independence from the US Dollar by building up European financial infrastructure.
In APAC, NZD rises amid good news from the New Zealand Institute of Economic Research Business Confidence Index. The index broadly reflects the economic environment and consumer confidence. It remained negative in 2020Q4, but the reading of -6 was a significant improvement against Q3’s -40. Since 2020, the index plunged to -70 in Q1 as the government shutdown most economic activities, and the Q4 reading is in fact the strongest since 2017Q3. The report shows that, construction is the spotlight in the economy and that both employment and investment are projected to improve in 2021. As a major exporter on many consumption goods including dairy, New Zealand’s economy should have started on a positive note this year with global demand accelerates the pick-up speed. This export-led economy should greatly benefit from global recovery, as should the New Zealand Dollar.