Yesterday’s main story across foreign exchange markets was one of a much weaker US dollar. Both the pound and euro gained handsomely against the buck as the US currency comes under fire following concern over the country’s rate of infection.
Due to an increasing divergence between Europe and the US with respect to controlling the spread of Covid-19, investors have become more and more comfortable holding European currencies such as the euro, pound, and Scandinavian pairs. The greenback has displayed an underlying weakness for a number of weeks now which has led to a slow grind higher for many of these currencies. The euro has been on a phenomenal run which saw it reach its best levels in over a year and a half yesterday.
EURUSD finally broke above the $1.15 resistance level yesterday, hitting some of its highest prices since the beginning of 2019! The weakness in the US dollar was felt across the board with the pound and commodity currencies gaining nicely. Sterling edged higher through the European morning session and, when US participants arrived, it mustered the momentum to convincingly break the $1.27 level for the first time on a multi-week basis.
Even though the greenback is on the ropes at present it cannot be ruled out from staging a comeback. At present the US dollar is reflecting concern over the domestic economy, however, there are many other external factors that contribute to its strength or weakness, some of which may begin to work in its favour soon.
Written by Viv Savani. 9:26am, July 22nd 2020
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