Dollar Slides From Highs
The dollar slipped back in early European forex trading on Friday but it remains close to a two-week high. That’s because an increase of Covid-19 infections increased worries about a potential second wave.
The dollar index was down by 0.1% at 97.352. It had earlier climbed to a daily high of 97.495, a level it has not reached since the start of June.
An increase in coronavirus cases in many U.S. states this week has prompted worries among investors. It caused concerns that the social distancing measures that were lifted as the states reopened may have to be reintroduced.
Beijing has accrued more than 150 new cases since last week. This prompted a lift in the city’s alert level and a reintroduction of travel curbs.
Additionally, the initial jobless claims figures on Thursday revealed an improving employment market. However, the progress is slowing and suggests the recovery will take time.
Dollar Slips, Euro in Focus
Elsewhere in FX markets, the euro was up by 0.1% at $1.1212. It was a little above the two-week low of $1.1186 on Thursday.
The euro/dollar is down around 0.4 percent this week, but still up 2.1 percent over the month. Questions now grow about the political viability of the EU Union’s stimulus plan.
The bloc’s 27 national heads get together on Friday via a video conference to discuss the European Commission’s proposal. They are discussing borrowing 750 billion euros against the EU budget to boost the region’s recovery. The country has suffered from an unprecedented economic downturn.
There are some disagreements over the size of the recovery package. Additionaly, they disagree over whether two-thirds of it should be paid to member states in grants as the commission proposes.
Analysts at Danske Bank said the latest noises make an agreement already there seem unlikely. But it will still give some clues on whether the market EUphoria of recent weeks was warranted. It will also give hints on whether the initiative is on course to be meaningfully watered down.
Moreover in forex, the pound/dollar pushed 0.2% higher to 1.2452. It was helped by a jump of 12% in retail sales in May. The pairing rebounded partly from the record fall of 18% the month before.
Sales were boosted by a 42% rise in household goods stores. That was with DIY shops and garden centers reopening.
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