Dollar Loses as Joblessness Rises, Markets Rise
The U.S. Dollar is losing ground this morning after looking to gain as a safe-haven from the turmoil in relations between the U.S. and China.
This week has been characterized by a revival of disagreement and negative back-and-forth as both administrations seek a way forward on trade while assigning blame for the COVID-19 crisis. Initially, the buck looked to rise overnight since there was a Senate bill passed to primarily promote oversight of foreign companies listed in U.S. exchanges. Nevertheless, after days of confusing and antagonistic statements, it looks like Huawei and other tech giants will be given some break by the State Department. Joblessness abounds, re-starting the economy is priority, but again, the ensuing verbal battle between the two largest economies is till the main mover of markets and dollar flows. At the time of writing, the greenback was falling further against majors such as Euro.
Jobless Claims this morning did not surprise as 2.4 million more filed for initial benefits, however, Continuing claims are looking like they are plateauing, which is another factor perceived as a positive step as markets look to flourish. We shall see if Purchasing Managers Index figures surprise when they are released at 9:45AM. Although infections are rapidly growing in places like Brazil, you are seeing some emerging markets improve and Mexican Peso is benefiting along with a better virus situation plus rising oil price.
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Expect news to be slow from the European front as the shared currency improves based on growing doubts on the buck and re-opening of national economies going well thus far. Many countries are celebrating Ascension Day, which will only mean Euro flows in the next few days may be directed by comparing data from elsewhere. PMI for the Euro-zone overnight revealed that while the continent is still facing its biggest downturn, businesses are starting to look towards expansion. A reading of 30.5 is till in contractionary mode, but it was a jump from 13.0 the month prior.
As we have mentioned, the Euro could see some serious appreciation if the trend continues and markets only look more positive from here. China is trying to make amends with Europe and assisting a lot, while the case with the U.S. needs resolve. Of course, China and U.S. shaking hands foments risk-appetite and another advantage for Euro longer term.
The British Pound is the only major currency not advancing against the buck since the Bank of England’s Governor Andrew Bailey left many scratching their head. Since Monday, we have been reminded that the U.K. is actively trying to separate form the European Union and establish a new set of rules and norms to trade “freely,” something that is only exacerbating turbulence and downgrading economic outlooks. As a result, the BOE is rightly being questioned as to what they will do to maintain the economy afloat as the U.K. deals with multiple issues simultaneously.
Bailey surprised as he told reporters that going into negative interest rates is plausible. The central bank is not “planning” on it, but it has been given very careful” consideration and talk. We see the opposite of Euro occurring with GBP as one region looks towards cooperation and the other seems puzzled as to where to go and what approach.