By Geoffrey Smith
Investing.com -- The dollar retreated slightly in early trading in Europe on Wednesday, as the reopening of the U.K.-French border for freight transport signalled a step back toward normality after the discovery of a new and highly contagious variant of the Covid-19 virus.
By 4:15 AM ET (0915 GMT), the dollar index, which tracks the greenback against a basket of advanced economy currencies, was down 0.3% at 90.400. The pound was the biggest gainer, rising 0.5% to $1.3424 and also rising back above 1.1000 against the euro. The euro was up 0.3% at $1.2195, helped at the margins by a better-than-expected reading for Italian business confidence.
The new coronavirus has in all likelihood established itself in the U.S. and continental Europe, various health officials said on Tuesday, which means that the issue shouldn’t burden sterling disproportionately in future, even though the U.K. was the first country to identify it.
However, inasmuch as it raises the likelihood of longer and tougher lockdowns, the variant is likely to weigh on riskier currencies and be dollar-supportive.
The sense of relief at the passage of the U.S. stimulus bill was tested late on Tuesday after President Donald Trump demanded changes to it, in a brief video that conflated provisions of the relief package with the broader government spending bill that was passed last week. Both bills passed with majorities big enough to override any presidential veto.
In meetings in the White House this week, Trump has reportedly raised the possibility of declaring martial law to force a rerun of the November election, after failing over 50 times to make claims of electoral fraud stick in the U.S. courts. He ended his video message by repeating that he may form the next administration.
The need for the relief package will be on show again later as the U.S. reports weekly jobless claims numbers. Initial claims are expected to have stayed at an elevated 885,000 last week.
Elsewhere, Israel faces its fourth election in two years after its governing coalition broke down, but the news didn’t stop the shekel’s relentless rise to a new 12-year high against the dollar. The shekel has risen 6.5% against the dollar this year, even more than the Chinese yuan has, as a sequence of deals normalizing diplomatic relations with traditional enemies have made it the best performing emerging market currency in the world.