Dollar Strengthened Against Euro, EU Considering EUR 750 Billion For Economic Recovery Initiative

For the first time since 2013, the share of the euro in global payments has surpassed the share of the US dollar.

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On Friday, November 20, the USD/EUR exchange rate rose by 0.15 percent to end the week at 0.8435. On the dollar index DXY, December futures increased by 0.11 percent and were at a level of 92.39. The day earlier, the single European currency increased by 0.16 percent, to 1.18701 against the US dollar and the DXY index showed a near-zero shift, closing at 92.29.

The foreign exchange market has recently seen rise in the Swiss franc and the Japanese yen, which are close to their annual highs against the US dollar, not only in conditionally risky currencies, like the Euro, but also in defensive ones. This may mean that the weakening of the US currency, in addition to an increased risk appetite, was encouraged by the inclination to redistribute global capital flows in favor of other currencies.

Thus, it became clear on Friday that in October, the volume of global SWIFT payments in Euros surpassed the volume of use of the US dollar for the first time since 2013, hitting the amount of 37.82 trillion. The share of the US currency, for comparison, was 37.64 percent. The tendency of market participants to minimize their positions in dollars due to the high degree of volatility in the run-up to the US elections, whose official results have not yet been summed up, may be one of the reasons for this.

Among the main European events on Friday was the EU summit, which addressed the EUR 1,074 trillion budget proposals for 2021-2027 and the EUR 750 billion economic recovery initiative previously stalled by Poland and Hungary. After the conference, it was agreed that talks with Warsaw and Budapest could proceed in order to find a consensus on the contentious issues. It is clear that the European Union’s differences will hinder the implementation of economic stimulus measures, which could lead in the future to a deeper economic downturn and a slower recovery.

In the meantime, in the United States, policymakers have returned to negotiating a new economic stimulus program, but as in the EU, progress has not yet been made in the negotiation process.

In terms of macroeconomic figures, data from the Philadelphia Federal Reserve’s business activity index was issued in the U.S. The indicator dropped in November by 6 percent to 26.3 points, which was better than the 22 point forecast of the analysts. In the secondary sector, home sales also surpassed the consensus estimate, with data on the number of initial unemployment insurance applications worse than anticipated.