The U.S. Dollar weakened further against some of its major counterparts as the world now navigates through the confusion in trade relations and the spotlight is shining brightly on issues within China.
New sanctions have been placed on China based on an attempt to address human rights abuses while Hong Kong is in crisis with protesters denouncing new legislation that could give further jurisdiction to Beijing over the somewhat autonomous city-state.
Meanwhile, the rest of the world is watching to see how it affects national interests but have more of a focus on returning people to work and figuring out if most labor can be recuperated. Recent statements hinting at a very negative rest of the year from world leaders are not affecting the mood in futures and equities that see only recovery in the horizon. Ultimately, investors and traders are putting faith in the slew of government and central banks’ help that has been given as life-support to the financial system and looks to address businesses as well as labor more directly. The buck cannot get away from losing ground to the petro-currencies CAD, NOK, and MXN; the free-movement-based AUD and NZD; nor EUR or GBP which continue testing higher ranges.
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The Euro is trading at its best level since the end of March, climbing as nations open up their economies and more aid is announced to provide a cushion from the COVID-19 damage. More grants may come via the European Central bank along with the Franco-German recovery funds agreed on last week. ECB President Christine Lagarde was clear in saying that experts seem to be miscalculating just how serious the economy will shrink because of this period of uncertainty and devastation.
The continent’s total output may fall by 12.0% instead of staying in the single digits. The EU Commission is now convinced that the main purpose of the body should be to prevent further inequality between state members thus instead of asking Italy and others hugely affected to borrow money, the northern states are looking to ease the pain with different measures and no paybacks required as much as just adherence to EU budget rules. This naturally looks promising for Euro prospects for appreciation.
The Pound has strengthened as dollar-pessimism grows with concern over intensifying issues with China and growing confidence in the U.K.’s ability to handle the current situation. While we have mentioned the ongoing battles in the Brexit war being detrimental to Sterling, this is now ignored as the short-term worries all regard national growth. Bank of England Chief Economist Andy Haldane spoke in a webinar explaining to bankers the central bank’s stance on recovery efforts. His statements presented a mostly concrete and positive assessment in highlighting that data has behaved better than the monetary policy members expected. Additionally, there was no mention of interest rates going negative nor any radical approach to the present task at hand.