The near-term outlook for the US dollar remains bleak. Covid-19 is still raging across the United States. America’s economy looks to be faltering and there seems no clear route to securing another economic stimulus package. Federal Reserve monetary policy might be left to fill the gap. None of this bodes well for the US dollar. The monetary policy-setting Federal Open Market Committee (FOMC) meets on December 15 and 16, and there will be plenty for policymakers to consider. Regardless of the prospects for an effective vaccine, the US remains in the grip of Covid-19. In addition, by the time the FOMC meets, it should become clearer whether last week’s surge in US Thanksgiving holiday-related domestic travel turned out to have been a coronavirus super-spreader event. In the meantime, and setting aside the epidemiological data, it seems fairly clear the coronavirus is again denting US economic activity. Weekly jobless claims, which records the number of those filing first-time claims for jobless benefits, increased last week. It did so for the second week in succession as Covid-19 and measures adopted to arrest its spread led to job losses. Initial claims for US state unemployment benefits rose by 30,000 to a seasonally adjusted 778,000 for the seven days ending on November 21, according to US Labour Department data released last week. That figure exceeded the 730,000 consensus expectation of economists polled by Reuters. Of course, it could be argued that job losses driven by the coronavirus are hardly going to be remedied by tweaks to US monetary policy. Even so, the Fed is likely to feel compelled to make some effort to respond and ensure its policy settings remain as ultra-accommodative as possible. Fed chair Jerome Powell has previously made the case for Congress and the White House to continue to work towards providing fiscal support for the US economy, but crafting such a package has proven elusive. Domestic political differences have arguably only become even more pronounced in the aftermath of the recent presidential election . Only time will tell, but without any agreement on a new fiscal stimulus package ahead of the Fed’s mid-December policy meeting, the FOMC might feel it has to give some additional forward guidance for US monetary policy. That guidance might, in turn, weigh on the value of the US dollar . The urgency of the situation should not be underestimated. Data released on November 7 showed that 13.7 million Americans were receiving unemployment benefits under March’s Coronavirus Aid, Relief and Economic Security (Cares) Act. The problem is that the act’s provisions , under which those benefits are being paid, expire on December 26 unless US politicians can agree a way to extend them. At the moment, with US President Donald Trump still insisting that President-elect Joe Biden and the Democratic Party stole the election , cross-party cooperation in Washington is in short supply. Already, and despite some resistance from the Fed, Trump’s Treasury Secretary Steven Mnuchin has stated that several Covid-19 lending programmes, designated for use by the Fed, will not be extended when they expire on December 31. If the Biden administration wants to redeploy that money, amounting to some US$455 billion, it appears it would require approval from Congress, including from the Republican-controlled Senate, to do so. Biden’s transition team has called Mnuchin’s move “deeply irresponsible” as the decision might restrict the incoming administration’s financial room for manoeuvre at a time when the pandemic is still raging. The decision stands, though. With all this in mind, it is perhaps no surprise that the currency market put the US dollar under some pressure last week after the minutes of the FOMC’s meeting of November 4-5 were published. Those minutes showed that, even before the developments of the past few weeks, the Fed was thinking about enhancing its current programme of asset purchases . Why the US dollar is only going to fall faster and harder “Regarding asset purchases, participants judged that it would be appropriate over coming months for the Federal Reserve to increase its holdings of Treasury securities and agency [Mortgage Backed Securities] at least at the current pace,” the minutes said, but, “Many participants judged that the Committee might want to enhance its guidance for asset purchases fairly soon.” Developments in the US since that November FOMC meeting might lead markets to realistically expect “fairly soon” to mean December 15-16. As a consequence, that could add to negative market sentiment around the value of the US dollar and further weakness could be on the horizon. Neal Kimberley is a commentator on macroeconomics and financial markets