The Dollar Lags Ahead of Earnings Season
The dollar has weakened in early European forex trading on Monday. Traders are turning to risk-sensitive currencies amid optimism over the upcoming earnings season. This continues even as the coronavirus outbreak continues on.
At 3:05 AM ET (0705 GMT), the dollar index was down by 0.2% at 96.448. That was not far from the June trough of 95.714. EUR/USD was up 0.2% to 1.1324
Moreover, GBP/USD gained by 0.2% at 1.2650, while USD/JPY rose by 0.1% at 107.95.
The U.S. corporate earnings season will start this week. This is expected to offer more evidence of a recovery, admittedly from already beaten-down levels.
Whether the valuations currently priced in are supported by the outlooks given by companies will be the key question.
Goldman Sachs has become a little more optimistic about earnings prospects for the S&P 500 Index this year. This has lifted the baseline forecast for S&P 500 earnings per share in 2020 to $115 from an estimate of $110.
The Dollar and the Resurgence of the Coronavirus Outbreak
This is despite the resurgence of COVID-19, with the WHO reporting 230,370 new cases in 24 hours on Sunday. Roughly a quarter of these new cases are in the U.S. The state of Florida reported more new cases in 24 hours than New York did in April, at such a hard-hit period.
Forex news reports the Fitch rating agency decided to confirm Italy’s credit rating with a stable outlook late Friday. This also helped the euro push higher against the dollar on Monday.
So, these moves have been limited. It’s also difficult to see a catalyst for sharp moves in the dollar in the near term.
ING said EUR/USD continues to trade around the 1.13 level. It has transformed into a gravity line over the past month.
In forex, at 3:05 AM ET, EUR/PLN traded 0.1% higher at 4.4624.
The USD Lags on the New Week
The dollar is lagging in the new week so far. As the risk mood keeps more positive for now, the greenback is weaker across the board.
However, losses are still modest for now, as key technical levels are still largely intact.
AUD/USD is still keeping under 0.7000. This continues even as buyers are keeping more near-term control on a push above its key hourly moving averages.
Cable is still trading under its own 200-day moving average despite a slight nudge higher today.
Looking out further this week, the risk mood will have to brace itself for the earnings season in the U.S. It will also have to await another bombardment of COVID-19 headlines after Monday.
