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Dollar Falls on Potential Vaccine 

The dollar was on the defensive in early European forex trading on Thursday. Investors were turning to perceived riskier currencies amid optimism surrounding a potential Covid-19 vaccine, as well as solid economic data.

At 3:05 AM ET (0705 GMT), the dollar index, was down 0.2%, at 97.013.

Forex news reports EUR/USD rose by .2% at 1.1272, and GBP/USD rose by 0.2% to 1.2493. However, USD/JPY was largely flat at 107.50.

News emerged late Wednesday that a potential Covid-19 vaccine developed by Pfizer and BioNTech produced positive results. This was in early-stage human trials.

This is raising optimism that an antidote to the virus can be found. Currently, the coronavirus pandemic has infected over 10 million and killed over 500,000 people.

This followed economic data which suggested that a global recovery is starting to gain momentum. For example, US manufacturing activity rebounded by more than expected in June.

The manufacturing activity index by the Institute for Supply Management hit its highest point in 14 months. China, Germany and France all rebounded too.

Attention will now shift to the official US employment report. This is due at 8:30 AM ET (1230 GMT), a day early, due to Friday’s US public holiday. Analysts expect it to show an increase of 3 million nonfarm payrolls in June.

However, it’s questionable whether the U.S. can sustain its economic recovery as coronavirus infections surge in many states. For example, Arizona, California, North Carolina, Tennessee and Texas all had record-high new case reports on Wednesday. As a result, it has caused them to roll back efforts to reopen their economies.


Dollar: July Nonfarm Payrolls could Disappoint the Markets

Analysts at ING said they are more nervous about the July nonfarm payrolls figure that will be published in August. This could significantly disappoint the FX markets.
If renewed containment measures across numerous states make it unviable for businesses to operate, they said, then it will only add to the problems in the jobs market.

James Bullard, St. Louis Federal Reserve Bank’s president, offered up a grave warning about the financial implications. That is, if the coronavirus outbreak isn’t contained.

Without more granular risk management on the part of health policy, they could get a wave of substantial bankruptcies. That could then feed into a financial crisis. This was a statement from Bullard in an interview with the Financial Times newspaper on Wednesday.

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