Dollar Down Again on Risk Rally

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Dollar Down Again on Risk Rally

AUGUST 24, 2020

The U.S. dollar is once again under pressure this morning as global stock markets have started the week on the front foot.

Overview

European stocks traded to a one-week high, and American shares look to do the same today on a brightened outlook for coronavirus vaccine and treatment, albeit with some controversy.  President Trump claimed that some at that U.S. Food and Drug Administration was a part of the “deep state,” which caused an uproar from both parties.

Over the weekend, the same agency gave emergency approval to a treatment involving blood plasma from recovered patients.  The overtly bullish market, jumped at a reason to send stocks higher, led by high-flying Apple and travel and leisure stocks.

The greenback has taken its cues from risk sentiment and retreated against most of its counterparts.  It is a slow day for economic data with only the Chicago Fed National Activity Index set for release.

The biggest risk event on this week’s calendar will be Federal Reserve Chairman Jerome Powell’s speech at the annual symposium in Jackson Hole, Wyoming.  Powell is expected to speak on the central bank’s review of its monetary policy framework and address its new inflation strategy.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro is up this morning on general dollar weakness.  The EUR/USD pair has spent the better part of the last two weeks trying to establish ranges at these new, higher levels.

The slowdown in the Euro’s momentum has caused traders to ponder whether the Euro’s run is over or if the common currency is consolidating before making a new push toward fresh two-year highs.

There is no major data out of the Eurozone today, but tomorrow German IFO data could provide a spark.

NZD

The New Zealand dollar initially sold-off to start the trading week, but the U.S. dollar’s weakness looks to win the race to the bottom today.  Indeed, Kiwi has rallied four-tenths of a percent since 4 a.m.

In general, the Kiwi seems vulnerable to more losses as a fresh bout of Covid cases has caused authorities to shut down Auckland, the nation’s largest city. Also, speculation has increased that the Reserve Bank of New Zealand will find the scope to ease monetary policy further to cope with the shutdowns.

Other commodity currencies, such as the Canadian dollar, are also experiencing a boost as the price of oil has risen a percent.

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