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Weekly market analysis: US dollar suffers as risk appetite rises

currency-newsWeekly market analysis: US dollar suffers as risk appetite rises
Key takeaways:

•    US dollar slides as Europe reopens economies

•    Fed Chair Jerome Powell says Fed has more ammo to bolster US economy

•    USD weekly lows: €0.91, £0.81, AU$1.52, NZ$1.64, C$1.39, ¥107.23, MXN$23.47

•    USD weekly highs: €0.92, £0.82, AU$1.55, NZ$1.67, C$1.40, ¥JPY107.60, MXN$23.78

The US dollar has struggled over the last week as risk-sentiment improved.

The reopening of European economies inspired hopes that the global economy will be able to start repairing the impact of the coronavirus crisis over the next few months. 

Russ Mould, an investment director at AJ Bel, said that easing coronavirus figures throughout Europe helped to ‘alleviate some of the concerns over a second wave in the pandemic’. 

The ‘Greenback’ also suffered from a sell-off of safe-haven assets after Federal Reserve Chairman Jerome Powell expressed optimism that America’s economy could start recovering in the second half of the year. 

Risk-sentiment improved after Mr Powell, while speaking to UBS on Sunday, stated that much of the outbreak had been contained and that America’s economy could rebound ‘substantially’. Mr Powell also added that the Fed has plenty of ‘ammunition’ to help the markets and the economy. 

Meanwhile, growing hopes for a coronavirus vaccine have lent strength to the risk-on mood this week, with eight initial volunteers in the US displaying a positive response to Moderna’s new RNA vaccine. 

On the flip side, US-China trade tensions flared again after Beijing accused the US of trying to shift responsibility for the coronavirus pandemic. 

Looking ahead, US dollar investors will be focusing on today’s testimony from Fed Chair Jerome Powell. Any further comments about the Fed’s plans to aid the US economy could create some currency movement. 

Thursday’s release of US initial jobless claims for May will also be in the spotlight. Another surge in unemployment could undermine hopes for a rapid economic recovery from the coronavirus crisis and may renew demand for safe-haven assets. 

Also influencing the US dollar will be Thursday’s release of May’s US PMI composite data. This will provide USD investors with an insight into how the American economy is faring.  
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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