DXY Rebounds amid Surging Covid-19 Cases in Europe & UK

A coronavirus variant spread in Britain when the public was upbeat on the vaccine inoculation. Several European countries have suspended travel links to the UK as the new variant was identified 70% more contagious than the original strain. Nonetheless, the new strain seems to have spread to other countries unnoticed. What's worse, experts could not be able to guarantee vaccine effectiveness against the new coronavirus mutant.

GBP/USD today opened low at gap while the DXY gaped down, amid fears about the variant. Previously, the pound has breached above 1.3600 in spite of the deadlocked Brexit talks. But the new variant fueled uncertainties and sparked a sharp correction in the overbought GBP/EUR.

On Dec. 20, Democratic and Republican leaders announced that a bipartisan deal on a $900 billion relief package had been finalized and could be quickly approved in the week. The positive dynamic has boosted the DXY. As more deal-related speculation is about to emerge around Christmas, GBP/EUR may see its correction extended, while the DXY could find some impetus to rally further. Besides, Trump's campaign said it would again ask the US Supreme Court to overturn results from the election.

The seriously oversold dollar is expected to see its rebound enduring amid the surging risk aversion. But the extension depends on the Senate election results on Jan. 5. If Republicans can hold either of the two Georgia runoff elections, pressures for the DXY will be on the cards. If Democrats win both races, however, the greenback will embrace upsides. With that said, traders are suggested of keeping an eye on the Senate election on Jan. 5.