The euro is gaining ground to the dollar during early Wednesday trading, following Janet Yellen’s comments to the senate finance committee in Washington as well as Italian Prime Minister Comte surviving a vote of confidence. Yellen, the Biden nominee for treasury secretary, reaffirmed her belief in the importance of the stimulus package proposed by the incoming administration and the continuation of the Fed’s dovish monetary stance. The combination of these two policies is likely to decrease real interest rates even further, generating conditions conducive to further dollar weakness.
Meanwhile, in Rome the Italian Prime Minister survived the departure of one of his coalition partners, avoiding a political crisis that potentially could have affected the confidence of investors in the single currency. Considering these two scenarios it seems reasonable to expect more dollar weakness ahead.