- Negative Market Mood Pushes Traders Back to USD
- IMF Less Optimistic on Recovery Prospects
- US Markets Continue Torrid Week
It has been a turbulent start to the week on Wall Street. The forex market has also been impacted as traders move back to the perceived safety of the US Dollar. This movement has left particularly the EUR/USD under pressure. This has been compounded by an increase in COVID-19 cases and a revision of the global economic outlook from the IMF that has now become less favorable. The stock market too is pointing downward for a second consecutive day.
Euro Slips as Traders Move Back to USD
Forex brokers have noted a strong move away from the Euro and back to the safe haven green back in recent days. This has left the pair dipping below 1.12 again having regained a lot of ground on positivity in recent weeks. There are a number of stumbling blocks impeding the strength of the Euro, not least the increase in coronavirus cases around the US and the move by some states such has New York, to improve 14-day quarantine on domestic arrivals from certain states.
This has put the brakes on forex trading in the Euro market as the next market movements remain uncertain, and fears of a second wave persist. Eyes will be on today’s meeting of the European Central Bank for indications around how they plan to respond to the latest developments.
IMF Outlook on Recovery Revised
There was also not great news for traders from the IMF. They have moved to downgrade their previous forecast on the speed at which they expect the global economy to recover. In April, they had predicted a 3% fall in global GDP. This number has now been revised upwards to 4.9%, with the impact of the coronavirus on the economy being the source of these downward revisions.
The fund have also noted that their forecast for 2021 has been downgraded too. An initial growth rate of 5.8% has been cut to 5.4% with warnings that there is still a great deal of uncertainty around these numbers as the situation is constantly evolving. Looking at individual regions, the report suggests that the US economy is expected to shrink by as much as 8% this year, with the EU following suit at a contraction of more than 10%.
Stock Markets Set to Open Lower Again
After a large scale sell-off on Wednesday, US stock markets are braced to open lower still on Thursday. Both the Dow Jones, and S&P 500 are set to open with losses of more than 0.5% in pre-market trading.
These numbers will not be helped by the unexpected jump in US jobless claims which came in worse than expected this morning. Analysts had forecast the number to be 1.35 million, but the Department of Labor announced that 1.45 million Americans had filed for unemployment benefit in the past week. The second consecutive week that this number comes in higher than expected.
Forex Market Majors Stabilize on Mixed US Retail Data
- US Retail Sales Grow Slower Than Expected
- Easing Coronavirus Restrictions Boost GBP Markets
- Biggest USD Sell-Off Since 2010
Retail sales data in the US came in lower than expected on Friday. The figures for July did show a slight increase though this was significantly below the numbers forecast. This has led to sideways trading in many major forex market pairs including the EUR/USD as traders consider their next moves. Meanwhile in the UK, Sterling continues to improve on news that some restrictions may be eased in the coming days. This all comes amid the worst week in a decade for the US Dollar index which is trading just above 93.00 at the time of writing.
Mixed Retail Sales Data a Stumbling Block for US
Forex trading in the major currency pairs continues to be steady today with no strong direction taken one way or the other. This comes in a large part due to the mixed retail sales data released by Washington today. This data noted a 1.2% increase in July. The figure is well below the 2.3% that had been expected. This would point to a recovery slowdown even as the S&P 500 bids to reach new heights.
There has still been no further progress with a proposed second stimulus deal in the country. Both sides are at loggerheads over the terms of a new deal as congress heads for a recess which could see the talks drag on for several weeks. This level of uncertainty leaves an already weak US Dollar, and other sectors of the economy in limbo.
Sterling Shows Strength as Reopening Moves Closer
The Pound has taken advantage of a weak US Dollar and increasing optimism over a successful Brexit negotiation to strengthen further. The currency has reached a several month high against the JPY breaking through the 140.00 threshold, and has also pushed beyond 1.31 in US Dollar trading. Sterling traders have been boosted further by hopes that domestic lockdown measures could be eased.
Forex brokers have also noted an uptick in support for the GBP as the chief negotiator for the UK in the ongoing Brexit negotiations, David Frost, commented on Thursday that he had high hopes of reaching a deal in September. This would undoubtedly push the Pound higher if a deal which has been stagnating for months, could be concluded.
US Dollar Index Continues to Spell Trouble
Despite the improving unemployment claim numbers in the US which came in under 1 million for the first time during the pandemic this week, the US Dollar continues to weaken against major world currencies. This is reflected in a very lacklustre US Dollar Index which has failed to gain any upward momentum and is headed for another losing week, the longest such streak since 2010.
There now exists genuine and credible fear of a US Dollar collapse with the ongoing COVID-19 pandemic taking its toll, and numbers failing to rebound on expectation. This has led many traders away from the Dollar toward more traditional safe havens like the Japanese Yen, and Swiss Franc.
Dollar Weakness Continues in Forex Market Despite Positives
- GBP Gains on USD Despite Huge Employment Drop
- Hopes Build For Airline Bailout as Stocks Surge
- Putin Claims Russian Victory in Vaccine Race
Even after revealing the largest quarterly employment drop in more than a decade, the GBP forex market managed to continue gaining ground on a US Dollar displaying weakness. More than 94,000 new unemployment claims were lodged in the UK for July alongside the employment drop. The currency weakness though has not negatively impacted Wall Street as stocks push for an eighth consecutive day of gains. It has also been widely reported that Russian leader Vladimir Putin has claimed his country to have developed the first coronavirus vaccine, with his daughter being among the initial recipients.
10-Year Record Employment Drop in UK
Employment numbers in the UK have seen their largest quarterly drop since 2009. This comes as the figures show there are 220,000 less people in employment than the previous quarter. The number of people in receipt of unemployment benefit has also seen a sharp rise of more than 100% over the same period, standing at 2.7 million people. The overall unemployment rate stands at 3.9% though this is not reflective of the situation on the ground where millions remain backed by government fiscal measures.
Still these dire numbers have not taken a toll on the Pound to date. This is due to an ongoing combination of US Dollar weakness combined with a prevailing optimism from the Bank of England that they will continue to support the economy if is encounters another stumbling block. Those forex trading the may also be buoyed by a renewed positive push on Wall Street which has pushed many away from the safety of the US Dollar.
Possible Bailout Helps Airline Stocks to Soar
Despite still being down record numbers, the fact that the TSA has clocked air travel at its highest rate since March was good enough for airline stocks to rise strongly in trading on Monday. This is a positive sign of a return to some degree of normality for a sector which has been hugely hampered by COVID-19.
Forex brokers were not the only ones to note strong activity in certain markets. Stock traders continued to push flagging airline stocks back up yesterday as support continued to grow for a new stimulus package to help the industry in the amount of $25 billion in federal payroll backing for airlines.
Russia Declares Successful Virus Vaccine Development
Despite some skepticism, Russian President Vladimir Putin has announced that the country has successfully developed the world’s first coronavirus vaccine. With many countries racing through trials to develop a vaccine, this would be a landmark achievement for Moscow.
He has also reported that one of his daughters has successfully received the vaccine. There are plans for mass vaccination to begin early next year. There are still widespread concerns that the virus may not have been fully tested, but the news is sure to stir a global reaction as markets on Wall Street open in search of another success day with futures trading positively.
Forex Market Majors Boosted by Positive Data
- US Jobless Numbers Drop as Euro Reach Highs
- Interest Rate Hold Helps GBP/USD
- Markets Wait on Stimulus Bill Update
Both the Euro and the Pound were given a timely boost against the US Dollar as unemployment numbers in the US came in much lower than expected. The number of new claims filed dropped almost 250,000. Sterling has been boosted further by the news that the Bank of England will leave interest rates unchanged for now. This positive news has not though impacted the opening on Wall Street as traders hold out for more news on the proposed stimulus deal.
Better Than Expected Unemployment Data Provides Confidence
Although unemployment numbers are still easily at record-setting numbers, there are continuing signs of movement in the right direction as the number of weekly claims has continued to trend downward, albeit against the expectations of analysts. They had forecast a figure above 1.4 million, though the number which came in is far below that at 1.186 million.
Continuing claims have also dropped by more than 800,000 and while there is still a great distance to go, traders and the forex market alike have been quick to take the positives from the situation. The EUR/USD market quickly moved to a new two-year high above 1.19 though this has since dropped back closer to 1.185 as many forex trading the pair await the outcome of the proposed second stimulus package for the US economy.
Pound Receives Boost from BoE
The Pound has been trading well in recent days, shaking off concerns over the stalling Brexit negotiations and a step back in the UK lockdown reopening process to gain further against a weakened US Dollar. It was further aided today by news that the bank will not move to negative interest rates at any time in the near future.
Although a positive message was taken by traders, and forex brokers noted an uptick in trading of the Pound, Bank of England Governor Andrew Bailey was also quick to warn that this should not be perceived as an optimistic outlook, and that the bank will continue to monitor developments closely. In other positive developments though, they also revised GDP projections to predict a 2020 contraction of 9.5% instead of the previously estimated 14%. This has all left the GBP/USD trading above 1.315, having hit a multi-month high.
Quiet Market Opening as Stimulus News is Awaited
Despite the drop in unemployment numbers, markets on Wall Street opened quietly on Thursday. This follows recent days of strong gains with the S&P 500 ending yesterday within 2% of its all-time high level.
Many traders are poised and waiting for further news on the new coronavirus stimulus package which has so far failed to overcome an impasse with lawmakers in Washington. It seems that several concessions have been made in a bid to get the package passed, though there still appears to be a gap between what is being proposed, and what some feel is appropriate.