Yesterday produced another round of US dollar selling as market participants flocked into currencies which are normally perceived to be a riskier choice. The EURUSD pair rose to just shy of $1.18 while the pound managed to brush against the $1.29 level. Commodity currencies had an impressive day and even the Japanese yen capitalised with USDJPY beginning to break down.
The weakness comes at the start of what will be a busy week for the US economy and in particular its currency. It’s a chock-a-block week for US company earnings, mixed with key data releases, an FOMC announcement, and ongoing discussions in Congress concerning new stimulus measures for the American people.
While there is always a chance the USD selling continues, many investors are using this latest move to build longer-term positions in the US dollar. The speed of the latest move indicates the potential for a snapback. In addition, the rate of infection across many troubled states is starting to slow down. If both the Federal Reserve and US government can ease concerns this week, the market may become more comfortable holding onto US dollars. The reality is, even though Europe appears to have things under control for the moment, it would still most likely be the US who begins to raise interest rates first when the economic crisis subsides.
Written by Viv Savani. 8:16am, July 28th 2020
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