BREAKING - Dollar Edges Higher; Sterling Under Brexit Pressure

The dollar edged higher from weak levels in early European trade Tuesday, with traders balancing rising Covid-19 cases and expanding lockdowns with likely fiscal stimulus and a vaccine rollout.

At 3:55 a.m. (ET), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 90.907, only slightly above the 2 1/2-year low of 90.471 on Friday.

EUR/USD edged 0.1% higher to 1.2112, but off Friday’s high of 1.2177, a level last seen in April 2018, while the risk-sensitive AUD/USD was down 0.2% at 0.7409.

The U.S. Congress is poised to vote this week on a stopgap funding measure. This is likely to pass, allowing the lawmakers more time to negotiate an emergency coronavirus stimulus plan, with a deal of around $908 billion already on the table.

The need for such a package is beyond dispute, with many states posting new records for deaths and hospitalizations following the Thanksgiving holiday. This has prompted new restrictions, with California shutting all but critical infrastructure and retail operations in its worst-hit areas, while a ban on indoor restaurant dining is also looming in New York City.

That said, ING kept its bearish dollar call, expecting the greenback to fall a further 5%-10% against most currencies in 2021.

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