Dollar Up; Stocks Fall on Trade Tensions; Kiwi Slides

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Dollar Up; Stocks Fall on Trade Tensions; Kiwi Slides

Increasing worries over Covid-19 and trade tensions weighed on risk sentiment overnight and boosted the dollar against most of its counterparts.

Overview

New cases in many U.S. states remain alarmingly high which is putting pressure on those state’s governments to slow down or even reverse reopening plans.  The spike (or high plateau) of cases is not confined to our borders.  Japan, Germany, Italy, and Israel are among the countries facing new threats.

The safe-haven dollar may also be seeing a boost on increased trade tensions between the Trump administration and Europe.  News broke late yesterday that the U.S. is considering implementing new tariffs on over three billion dollars’ worth of exports from France, Germany, Spain and the U.K.  The spat is an extension of a long-fought battle over aircraft subsidies.

The economic docket is light today so expect the dollar to take its cues from the prevailing risk sentiment.  The Fed’s Evans and Bullard speak at different events this afternoon and are worthy of our attention.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro slipped against the safe-haven dollar overnight despite data that showed the bloc’s largest economy is experiencing an improved business climate.  The IFO gauge rose to 86.2 in June, rising for a second straight month and beating a forecast of 85.  The report showed that German businesses are now more confident that billions of euro in fiscal support from the government will allow the economy to recover in the second half of the year.

The recovery could be stymied, however, if officials are unable to contain recent outbreaks.  Local outbreaks, especially in Berlin, continue to worry market participants. Germany reported 712 new cases yesterday.

NZD

The New Zealand dollar took a nosedive versus the greenback, losing a full percent against its American rival.  The Reserve Bank of New Zealand appeared to try to talk down its own currency by saying the kiwi appreciation placed pressure on export earnings.  Traders are taking the statement as a warning the central bank could intervene in currency markets if kiwi strength persists.  The RBNZ left rates and a record low and indicated it could introduce new stimulus if needed.

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