Forex – Dollar Helped by Fed’s Grim Outlook, For Now

© Reuters.

By Peter Nurse – The dollar pushed higher in early European trade Thursday, with investors willing to head back towards this safe haven after the Federal Reserve’s dreary economic outlook.

 At 3:10 AM ET (0710 GMT), the , which tracks the greenback against a basket of six other currencies, was up 0.4% at 96.318. traded largely unchanged at 107.09, but dropped 0.7% to 1.2656.

The U.S. central bank projected late Wednesday that the U.S. economy would shrink 6.5% this year and the unemployment rate would be 9.3% at year’s end.

That was a gloomier view than many in the market had expected, particularly after Friday’s shock employment report, and sent investors out of stocks, away from riskier currencies and towards bonds and the dollar.

The retreated from an overnight 11-month high, dropping 1% to $0.6929, the gave up a four-and-a-half month high and fell 0.7% to $0.6493. 

That said, with the Federal Reserve indicating that its loose monetary policy is set to stay for the long haul, this dollar strength is likely to be a temporary phenomenon.

“The broad trade weighted dollar is within a whisker of return to the mid-March lows, right before the USD funding markets seized up and the dollar hoarding story developed,” said ING, in a note to clients. 

“No doubt investors are jumping on the view that the FOMC median expectation was for unchanged Fed rates right through 2022, maintaining demand for higher yielding assets.”

fell 0.1% to 1.1358, only registering small losses after hitting a three month peak overnight.

The single currency has been boosted of late by signs of the continent’s countries working together to combat the coronavirus, with the EU’s executive Commission proposing a hefty recovery fund, made up of grants and loans for every EU member state.

The Eurogroup, a grouping of E.U. finance ministers, is set to meet later Thursday, to discuss the EU recovery fund. 

However, “given the differences between the EU commission and e.g. the Netherlands and Austria, the proposal for the recovery fund needs some work before it can be passed in the various parliaments,” analysts at Danske Bank wrote, in a research note.



Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source: Forex – Dollar Helped by Fed’s Grim Outlook, For Now

Spread the love

Related Articles

Leave a Reply

Our website uses cookies and thereby collects information about your visit to improve our website (by analyzing), show you Social Media content and relevant advertisements. Please see our cookies page for furher details or agree by clicking the 'Accept' button.