By Peter Nurse
Investing.com - The dollar steadied in early European trade Tuesday, as traders looked again at the impact of the Covid-19 surge after Monday’s euphoric turn away from safe havens in the wake of Pfizer’s vaccine news.
At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.778, above Monday's 10-week low of 92.12.
EUR/USD rose 0.1% to 1.1816, just off a two-month high ahead of the release of the German ZEW index at 5 AM ET (1000 GMT).
GBP/USD rose 0.1% to 1.3171, near a nine-week high despite data showing record high redundancies in October, and USD/JPY fell 0.3% to 105.03, while the risk sensitive AUD/USD fell 0.1% to 0.7278, near Monday’s seven-week high.
The news from Pfizer (NYSE:PFE), and its partner BioNTech, that data from their phase III trial suggests their vaccine is “90% effective in preventing Covid-19” prompted a rush into risker currencies Monday as traders saw this as the first step towards the global economy returning to normalcy.
However, a degree of caution has returned to the foreign exchange market in the course of 16 hours of reflection.
“None of this unfortunately changes the near-term fact that the global economy faces a challenging winter,” said analysts at ING, in a research note.
“There are also still some important questions surrounding the vaccines that will be key to the economic outlook. How effective will the vaccine prove when rolled out to the wider population? What share of the population will be vaccinated? And how long will it take to roll-out - particularly given complexities in transporting/storing some of the vaccines at the necessary sub-zero temperatures, but also because it will likely require two shots.”
There also remain key questions over the U.S. presidential election, with incumbent Donald Trump showing no signs of conceding.
Trump is completely within his rights to look into “irregularities” from the election, Senate Majority Leader Mitch McConnell said on Monday, while again voicing his resistance to the Democrats' plan for a large coronavirus relief package.
Just over 59,000 Covid-19 patients were in hospitals across the United States on Monday, according to Reuters data. This is the country's highest number ever of in-patients being treated for the disease, as new infections remained above 100,000 for the sixth consecutive day.
Elsewhere, USD/TRY rose 2.4% to 8.2604 after Turkish President Recep Tayyip Erdogan accepted the resignation of his son-in-law Berat Albayrak from his role as treasury and finance minister.
This represents more turmoil in a country which has seen its currency losing about 30% against the dollar in 2020.
Additionally, USD/CNY edged down 0.2% to 6.6119. Data released earlier in the day showed that China’s October consumer and producer price indices both saw smaller-than-expected growth year-on-year, and the CPI also saw smaller-than-expected growth month-on-month.