The U.S. Dollar is being pulled in different directions as European currencies remain powerful while the decline in stocks and fears of over the U.S. economic lag caused losses for other tenders.
Pacific Rim currencies as well as our neighboring Mexican Peso and Canadian Dollar fell in value resulting from growing concerns about the long-term impact of negative COVID-19 effects over commercial activity.
The difference in deadliness and magnitude is now concerning investors as China looks likely to expand in Q3 and Q4 by as much as 4.0% while Federal Reserve branches are split on just how bad a contraction the U.S. could suffer. One signal of hope did get released this morning in the form of June Consumer Price Index, which showed higher inflationary growth than expected at 0.2% over 0.1% excluding food and energy costs.
The buck is likely going to face further challenges and swings as relations with China get more intense with the U.S. officially breaking neutral silence over China’s controversial interventions and island-building in the South China Sea, where heavy trading takes place and America plays a role in monitoring and maintaining safe. Furthermore, the U.S. and the U.K. are actively engaging in measures against tech giants such as Huawei that want to be responsible for networks and their infrastructure. We shall see if the buck can maintain some buoyancy as it faces a California shutdown and issues over the Payroll Protection Program.
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The Euro remains on the rise as European stocks and economic improvement are now factors also aiding its appreciation. Additionally, Germany’s Angela Merkel is making sure to take reins of negotiation over the aid package and is uniting her voice with Italy’s Prime Minister Giuseppe Conte who wants the passage of what could be a big boost to his ability to spend.
At the moment, the shared currency is also catching a break by not being influenced in a negative way from the potential of levied tariffs on French imports. Momentum is definitely with Euro ahead of the big Friday meeting when all European leaders will assess what it will take to get the wheels moving and pass the rescue package.
Sterling experienced a change of fortunes as a surprise in economic growth dented the currency’s advancement. A measure of Monthly GDP for May revealed a 1.8% expansion, which is a great disappointment and way off the mark of the estimated 5.5%. Re-openings in the U.K. have looked less smooth than Europe’s big nations and the union.
Additionally, a release of a very long document basically setting out regulations and conditions for trade post-Brexit is setting alarms as businesses worry over the hard work that will be needed to adjust to what will present obstacles to commerce. A less lenient U.K. in Brexit talks makes our forecast for Pound look different since we actually see an opportunity for the U.K. to set up something positive not problematic.