European session review: USD declines on expectations of more stimulus from Fed

USD fell against most of its major rivals in the European session on Tuesday as market participants bet that the Federal Reserve will take actions to support the U.S. economy during the months it will likely take before the effective coronavirus vaccines are produced and distributed at the scale needed to allow the activity to return to pre-pandemic levels. 

The Fed chairman Jerome Powell is set to testify in front of the Senate Banking Committee today at 15:00 GMT. In prepared remarks, Powell said that the U.S. economy faces a "challenging" few months due to a resurgence of coronavirus infections. "A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities,” he added. Powell also noted that "recent news on the vaccine front is very positive for the medium term" but "for now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups".

Powell's cautious assessment, as well as the continued gridlock on additional fiscal stimulus, has markets betting that the Fed will take actions to support the U.S. economy, when its policymakers gather on December 15-16.