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Weekly Roundup: Will a dovish Federal Reserve buoy the ‘Greenback’?

currency-newsWeekly Roundup: Will a dovish Federal Reserve buoy the ‘Greenback’?
The US dollar (USD) struggled at the beginning of last week as hopes of a possible Covid-19 vaccine boosted risk appetite and weighed on demand for the safe-haven ‘Greenback’.

US Initial Jobless claims rose to a worse-than-expected 1.4 million, up on the previous week which left many USD investors concerned for the US’s economic recovery.

Adding to worries over the recovery of the US economy is the deadlock in Congress on the next US stimulus package and relief bill. Some unemployment benefits are due to expire at the end of July and traders are becoming concerned over the Democrat and Republican stalemate.

On top of this, US-China relations flared up again after the US ordered China to close its consulate in Houston. China retaliated with a similar measure, telling the US to close its consulate in Chengdu.

All these mounting concerns have led to a broad weakness in the US dollar and caused it to lose some of its safe haven appeal.

Friday’s US Markit PMI Composite for July did little to cheer investors, with manufacturing showing growth in July but below-forecast services figures showed slight contraction.

The slightly better-than-expected durable goods orders for June at the start of the week may help to cap US dollar losses after they came in at 7.3%, above the 7% forecast.

Nevertheless, the flagging American economy continues to drag down hopes that the Federal Reserve could offer a brighter outlook for the economy in this week’s post-interest rate statement.

US dollar investors will keep a close eye on Wednesday’s interest rate decision from the Federal Reserve, which is expected to hold at 0.25%. However, any dovishness from the Fed could buoy the US dollar.

The US dollar will likely be driven by risk-sentiment this week. Any signs of the global economy slowing down over fears of a possible second wave of the coronavirus would boost the safe-haven ‘Greenback’.
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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