U.S. Dollar rises post-Fed pessimism and joblessness
AUGUST 20, 2020
The U.S. Dollar is trading in much better ranges, improving primarily as a result of growing concern over the actual strength of an economic recovery in the United States and how that plays into the overall global outlook picture.
Yesterday’s main risk event in the form of the FOMC Minutes from the Fed’s last meeting revealed a very uncertain committee that sees struggles that are going to be hard to overcome quickly. Consequentially, the equity world started retreating, fearing that too much value has been given to global markets in pricing in a return to prosperity.
While S&P and other U.S. exchanges erased their 2020 losses, other regions are seeing their stock indices dwindle as the initial optimistic sentiment faces challenges with concern over U.S. performance as well as diplomatic havoc. Today, Jobless Claims proved that there is plenty of room for improvement in U.S. labor as Initial Claims came in above a million while Continuing claims came in only slightly below expectations.
We shall watch if members of Congress revive stalled negotiations over a rescue fiscal package as the week closes. There are some declines in infections of COVID-19 in the U.S., but the condition is still not disappearing as new cases have been seen in Spain, France, and Italy after a break in bad data. It is worth noting that Mexican Peso and other petro-currencies are seeing depreciation of at least half a percent after comments from OPEC+ as well as New York Fed officials that the demand for oil could diminish, which in turn caused WTI crude to fall from its highest point in five months.
What to Watch Today…
- No major events scheduled for today
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The Euro has experienced its first speed bump this month as news of a cautious Fed and lower demand for European equities made the shared currency take a break from gains. Tomorrow’s Purchasing Managers Index figures will be the main piece of data that can either maintain Euro elevated or start raining on its parade.
The rapid advancement for the currency since the end of July, which has seen it rise by 2.2%, is still due to the relief from the rescue package, the global reaction to such a step in EU integration, and better-than-expected data releases.
Sterling has not been stellar lately as there are growing worries about how things could change for the U.K. if the second wave of infections hit while there is no clarity on Brexit nor trade after. The end of the year looks blurry for the U.K. as experts think the virus could make a dent to the V-shaped economic recovery many are counting on.
Additionally, this week has not produced anything indicative of progress, but rather further will to separate all operations from one another down the line. A European Union top markets regulator suggested rules change so there would be limitations to handling companies’ finances from London. We do not see much opportunity for Pound to rise under these conditions and we shall see if the buck’s rise is limited to today or ongoing against Pound.