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Dollar Falls in Tight Trading Ranges

The dollar edged lower in early European forex trading on Friday, but trading ranges have been tight. Traders weighed the conflicting forces of economic recovery. Meanwhile, tensions heightened over China’s move to tighten control over Hong Kong.

In the FX market, the U.S. Dollar Index stood at 98.293, down by 0.1%. USD/JPY fell 0.4% to 107.18 and GBP/USD rose 0.2% at 1.2344.

Some data on Friday showed that German retail sales fell at their fastest pace since 2007 in April. But the drop, at 5.3% on the month, was not as sharp as expected.

It was a sign of the relative resilience of Europe’s largest economy during the coronavirus crisis. Figures in March were also revised to reflect a gentler decline.

In the U.S., Thursday’s initial jobless claims data showed more than two million Americans filed for unemployment benefits. However, the weekly totals have continued to fall ever since hitting a peak of 6.8 million in late March.

Minori Uchida, head of global market research at MUFG Bank in Tokyo said that hopes for economic recovery are strong. However, he expects this to gradually fade with increased concern about the U.S.-China relationship.

When that happens, there’ll be more risk-off trades, which supports the buying power of the dollar and the yen, he added.

Dollar Pairings in the Forex Exchange Market

At the current moment, the forex exchange market is holding its breath ahead of U.S. President Donald Trump’s statement. This was the President’s response to the Chinese parliament’s passing of an anti-sedition law regarding Hong Kong.

Analysts at Danske Bank said the question is, how far Trump will go at today’s press conference? This is happening as the removal of Hong Kong’s favored status would probably spark negative market developments, hitting global risk sentiment.

The dollar (USD) traded at 7.1515 against the Chinese yen, not far off the record 7.1966 reached on Thursday.

The euro continued to strengthen on Friday, driven by increased confidence in the global economy. It is also driven by the fact that EU institutions are starting to agree that an accommodative stance is needed, especially in terms of fiscal policy. 

Analysts at Barclays said they have seen that the latest European Commission proposals for an increase in the EU Budget. It also includes a recovery fund of €750bn, which could be a potential game-changer. 

Meanwhile, the euro and dollar pair (EUR/USD) traded at $1.1098, up by 0.2%. It had broken through the $1.11 level earlier for the first time since late March.

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