US Greenback Outlook: Coronavirus Second Wave Danger, Fed Chair Powell Testimony to Congress, Structural Unemployment May Bolster USD Worth Motion
- US Greenback catches a reduction bounce as merchants flip skittish and market sentiment wanes
- The DXY Index makes an attempt to construct a base after sinking 6% from its year-to-date excessive
- USD value motion eyes second wave threat and a scheduled testimony on FOMC financial coverage
The US Greenbackis buying and selling on its again foot because the DXY Index peels again from a rebound greater staged late final week. But, because the US Greenback rises from the useless, alongside the resurgence of volatility, USD value motion may construct upon its current reversal try.
That is in consideration of lingering demand for safe-haven currencies, such because the US Greenback, which may intensify within the days forward if catalyzed by threats from a second wave of coronavirus circumstances or a scheduled congressional testimony from Federal Reserve Chair Jerome Powell. Fed Chair Powell is scheduled to tee off his testimony to congress on Tuesday, June 16 at 14:00 GMT.
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Fed Chair Powell Congressional Testimony: FOMC Stability Sheet & Unemploymen in Focus
The potential US Greenback reversal try seems prefer it corresponded with the newest FOMC announcement. The central financial institution assembly revealed discouraging financial forecasts, just like the anticipated must hold rates of interest decrease for longer, which was underscored by pessimistic commentary from Fed Chair Powell on lasting structural harm executed to the US jobs market amid 20-plus million People all of a sudden unemployed.
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In response to financial turmoil weathered earlier this 12 months, unprecedented Fed steadiness sheet progress helped improved investor confidence by offering liquidity to cash-strapped companies. How way more financial stimulus the Fed is in a position and keen to offer by way of steadiness sheet progress may get positioned underneath scrutiny by politicians, which stands to weigh on USD value motion in flip. Fed Chair Powell may additionally spook buyers and spur safe-haven demand when discussing US unemployment.
New Coronavirus Instances Trending Sideways as Lockdown Measures Scale Again
One other major driver that has critical potential to weigh on the course of the US Greenback contains the development of latest confirmed coronavirus circumstances. The 7-day transferring common of latest coronavirus circumstances has drifted sideways for the final month. That mentioned, there’s potential that the variety of new COVID-19 circumstances begins to development greater as lockdown measures are scaled again by governments and companies.
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This threat has been exacerbated by People gathering in crowds by the hundreds to protest the dying of George Floyd. The specter of a second wave thus stays appreciable and will current a bullish tailwind for the US Greenback.
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— Written by Wealthy Dvorak, Analyst for DailyFX.com
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