Dollar Rises, Stocks Fall as Powell Paints Gloomy Outlook
The US dollar caught another bid yesterday as a risk-off tone ran through financial markets following the Fed Chair’s economic update. Jerome Powell painted a concerning picture, confirming that he expects the unemployment rate to peak within the next month or two. Global stock indices crashed lower which pushed investors into the safety of the buck.
The pound and euro fared up a lot better than many of the other majors with the commodity currencies being hit the hardest. Cable (GBPUSD) fell to the bottom of the $1.22 handle and overnight has broken into the $1.21s while EURUSD currently trades a fraction above $1.08. With European and US stock markets getting hit to the tune of 2% the reversal of the euro carry trade kept the euro moderately supported against the buck, capping its losses to 0.15% on the day. As a result, GBPEUR clocked up another day of losses, edging into the €1.12s.
As European traders and dealers prepare for what will be a testing Thursday session, given the enhanced volatility over the last 48 hours, a look at the economic calendar shows there’s little to focus on with respect to data points. However, there is one piece of data which many will focus closely on, as usual, weekly US initial jobless claims are scheduled for release at 13.30 this lunchtime. The consensus is for another rise of 2,500,000 following last week’s 3,169,000.
Written by Viv Savani. 9:12am, May 14th 2020
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9:28am, May 15th 2020
Sterling Looking Vulnerable As Week Draws to a Close