USD gains on safe haven inflows
17 July

USD gains on safe haven inflows


EU leaders will today meet in person for the first time since February to try and settle their differences over a radical 750 billion-euro fund designed to help the bloc’s economies recover from the worst recession in living memory. Dutch Prime Minister Mark Rutte, who’s been leading the criticism of the plan, said he’s “sombre” about the prospects for the weekend talks. He is the main holdout among the camp of northern, wealthy EU countries demanding a smaller overall package, economic reforms as condition to getting funds, inflated vetting process for granting aid and keeping rebates for net payers to the bloc’s budget. Hungary has also threatened with a veto. High-debt southern countries like Italy and Spain call for the recovery financing to come as free grants rather than repayable loans. Europe’s stocks and common currency have gained since the fund was first proposed, well supported by hopes that European officials will agree on the fiscal stimulus measures.


The dollar held onto gains against most currencies today as worries that a resurgence in the coronavirus is starting to curb economic activity drew investors towards the USD. The Chinese yuan fell by the most in three weeks, undone by a steady increase in diplomatic frictions between the United States and China. The dollar stood at 107.15 yen, following a 0.3% gain in the previous session. Sterling was little changed at $1.2551. The euro was marginally higher against the British pound at 90.85 pence. For the week, the dollar is on course for gains against the yen, sterling, and the Swiss franc due to safe-haven inflows.


The FTSE 100 is set to close with a weekly gain as hopes of more stimulus and signs of progress in developing a COVID-19 vaccine supported risk sentiment amid a surge in global infections. The blue-chip index was up 0.2% in early trade, tracking small gains in Asia following a drop yesterday that was sparked by underwhelming retail sales data from China. The UK government is to pour £3 bn pounds into the National Health Service to deal with a potential resurgence of the coronavirus. Britain is the worst-affected country in Europe by COVID-19 with a death toll from confirmed cases of more than 45,000. In recent weeks, the country has eased lockdown restrictions as infection rates have fallen but the government said it must now begin to prepare for a potential second peak in cases over winter.


US indices were little moved as Dow Jones dipped just 1 point while S&P 500 was also little changed. Nasdaq 100 traded in positive territory. During regular trading, the Dow slid 135 points to post is first daily decline in five days. Initial weekly jobless claims rose by 1.3 million in the week ending July 11. Meanwhile, retail sales jumped 7.5% last month. June’s sharp gains come after sales surged by a record 17.7% in May. Yet, another jump in coronavirus infections has forced California and other US states to at least partially shut down again, raising fears the economy and labour market will continue to struggle. Asian stocks were poised for a muted start today, after weakness in technology shares weighed on the Wall Street session. Futures in Hong Kong and Australia edged higher.


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