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Dollar Unchanged over US Fiscal Stimulus

The dollar was little changed in early forex trading in Europe on Tuesday. There was no breakthrough in the U.S. fiscal stimulus talks to push it in either direction.

Reports of a decline in hospitalizations in the U.S. due to the Covid-19 virus, somehow supported risk appetite. It strengthened confidence that the pandemic is coming back under control. This was in response to more restrictive measures in the south and west of the country in June and July.

In the ZEW index, the euro was quite ahead of the first big sentiment indicator of the month in Europe. At 3 AM ET (0700 GMT), it remained unchanged at $1.1737.

Consensus expectations for ZEW are for a modest decline in the main index to 58 from 59.3 in July. Although the more important number will arguably be the sub-index for current conditions. That is expected to improve to -68.8 from -80.9.

The euro was also flat against sterling in the FX market. It rose less than 0.1% to 0.8982 after U.K. labor market data came out. It showed the biggest fall in employment since 2009 in the three months through July.

The Dollar: The Labor Market Weakens Further

Some 220,000 jobs were lost and the number of people claiming jobless benefits soared by 94,400. Well above the consensus forecast of 10,000 and only partially offset by a downward revision to June’s figures.

The Bank is still ready to add stimulus if the economy weakens again. This was a statement from Dave Ramsden, a member of the Bank of England’s Monetary Policy Council, in an interview.

In forex, Sterling also edged down by 0.1% against the dollar to $1.3060. It kept some support after a reasonably solid survey from the British Retail Consortium. It suggested that retail sales were 3.2% higher in July than a year ago.

Pantheon Economics analyst Samuel Tombs noted that the BRC figures may flatter the underlying trend. It’s because services spending has likely benefited from the release of pent-up demand and the running down of enforced savings.

Tombs said this was unlikely to continue as the labor market weakens further.

Forex news reports the Turkish lira strengthened modestly after sharp losses last week. This was on fears of a looming balance of payments crisis. The dollar fell 0.5% to 7.2958 lira.



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