Market concerns of longer lockdowns and escalation of US/European tariff spat help dollar after two days of losses
Economic optimism faded overnight as more US states reported pockets of Covid and some emerging market countries have not yet seen their number of cases peak. The dollar benefited despite weekly mortgage application data coming in worse than expected. The US is considering more tariffs on $3B worth of European goods and the EU is considering banning US travelers due to weak Covid controls in the US.
June 24, 2020
EUR/USD 1.1275 GBP/USD 1.2490 USD/CAD 1.3563 AUD/USD 0.6918 USD/JPY 106.7200. USD/CNH 7.0767 USD/ILS 3.4298 USD/MXN 22.5654 USD/CHF 0.9469 USD/INR 75.7250
The dollar gained after two days of losses as financial markets replaced optimism with the threat of deteriorating relations between the US and Europe. An ongoing tariff fight which started with aircraft manufacturing subsidies is spreading to other sectors. The EU considers US Covid containment measures weak and is now considering limiting travelers from the US.
Treasury Secretary Steve Mnuchin said he expects China to honor their obligations under the trade deal.GBP
The pound rallied yesterday after PM Johnson announced a July lifting of the lockdown, but then gave back gains overnight as financial markets priced in individuals' choice to likely wait for a vaccine before returning to pre-Covid levels of spending.EUR
The euro sank after two days of gains on concerns Covid will limit economic activity well into next year. Also, reports have emerged that the EU, which is currently finalizing who can visit the bloc, may exclude US citizens because, in its opinion, the US has failed to control the virus. Such a move is likely to further increase tensions at the already fraught trade negotiations.CAD
The Canadian dollar weakened on broader concerns of Covid-related lockdowns continuing even at a less stringent level. The price of oil dropped 2% and the US/EU trade disagreements contributed to negative loonie sentiment.ASIA/PACIFIC
The Chinese renminbi was little changed vs. the US dollar as Chinese authorities choose a stable currency over increased exports. Many market participants see a strengthening renminbi the more likely scenario as US uncertainty around the November elections becomes more pronounced in Q3.
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