Euro struggles as U.S. deal hopes fade, COVID spreads
The euro struggled to rise above the $1.18 level on Tuesday as fading hopes for a U.S. coronavirus aid package dealt a blow to risky assets worldwide, with rising coronavirus infections in Europe also weighing on the single currency.
While markets remain hopeful talks between U.S. House Speaker Pelosi and Treasury Secretary Mnuchin will result in a deal before the Nov 3 presidential election, any agreement will have to pass the Republican-controlled Senate where opposition to a bigger stimulus bill remains stubborn.
Those concerns pushed the euro (EUR=EBS) lower in early trades, with the single currency down 0.1% at $1.17600 after it briefly popped to a one-week high of $1.1794 in the previous session.
"As we approach U.S. elections and with COVID infections around the globe rising at a fast pace, investors may refrain from engaging into large trading positions," said Charalambos Pissouros, a senior market analyst at JFD Group.
France reported a massive jump in people hospitalized with COVID-19 and Ireland announced some of Europe's toughest restrictions.
Elsewhere, the Australian dollar dropped 0.3% to $0.7045 , hitting a three-week low of $0.7038 on increasing expectations of monetary easing next month by the country's central bank.
Minutes of the Reserve Bank of Australia's (RBA) last policy meeting confirmed the Board had discussed cutting rates and buying longer-dated debt as a means to support the economy and restrain the currency.
Sterling held on to small gains made the previous day at $1.2941 .
Britain's chief Brexit negotiator David Frost said there was no basis to resume trade talks with the European Union unless there was a fundamental change in Brussels' approach to negotiations.
Elsewhere, the dollar index (=USD) was broadly steady at 93.484.