News & Analysis
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If the US economy underperforms its global peers in Q3 due to a severe domestic second wave, will the dollar continue to strengthen on haven demand? With FOMC minutes and US jobs data out this week markets will have plenty of impetus to ponder the question.
The US dollar has opened today very much on the back foot, with the entire G10 group of currencies up on the day. Reports of coronavirus vaccine progress may also be bouying risk appetite in general, and therefore reducing demand for the greenback as a safe haven.
The domestic US Covid-19 situation has clearly deteriorated this week, with new cases increasing on average across the nation and several states showing signs of severe outbreaks that may threaten to pressure healthcare systems.
The Zambian Kwacha enjoyed a relative patch of stability in January and February 2020 following significant tightening of the central bank’s monetary policy in November and December 2019.
While China’s economy was the first to experience lockdown measures due to it being the epicenter of the pandemic, it was also one of the first countries to flatten the curve. After contracting 6.8% in Q1 due to the lockdown measures rolled out nationally, the Chinese economy is set to rebound at a rapid pace in Q2.
Although sterling has indeed weakened with other “high beta” or more risk-sensitive currencies during recent risk-off events, other aspects of UK macro markets suggest that calling the pound an EM currency is an exaggeration.
Markets barely flinched at today’s decision by the Czech National Bank to leave its 2-week repurchase rate at 0.25%, as the move was fully priced in – all economists who provided Bloomberg with an estimate of today’s decision expected the Bank to keep rates on hold.
Yesterday’s disruptive comments on trade from White House adviser Peter Navarro turned out to be a storm in a teacup – no further indications have come that the US-China trade deal is currently in jeopardy.
After falling against most of its G10 peers yesterday on hopes of recovery, the dollar had a bumpy ride this morning and whipsawed back and forth following comments from US trade adviser Peter Navarro.
For much of May and June, broad moves in risk sentiment have dominated major FX pairs, with the US dollar strengthening during risk-off periods and weakening as risk appetite improved. As a result, the broad dollar’s performance has traded with an inverse relationship to US equities.