USD retracts against most currencies
22 July

USD retracts against most currencies


The dollar nursed losses against most currencies undermined by concern that Republicans and Democrats – unlike their European counterparts - are struggling to reach consensus on the next round of stimulus measures. There is still no agreement on how much to spend on the next round of coronavirus relief as they discussed proposals to extend unemployment insurance for Americans thrown out of work and provide more money for schools. Other data that might affect the greenback include US existing home sales due later today and weekly jobless claims on Thursday. S&P 500 advanced 0.4% in line with the relatively positive mood. The Dow rose 0.6% but the Nasdaq was shakier giving back some gains from Monday.


The euro stood at an 18-month high as economic recovery hopes drove bets on rebounding world demand and a falling USD. The euro’s rally was triggered by European Union leaders striking a deal for a region-wide rescue plan, a huge step toward both recovery and a stronger union. The common currency surged to $1.1543, its best since January 2019, as investors bet an economic rebound would benefit currencies besides the dollar as global exports pick up and trade improves. The single currency has gained more than 6% in the past three months.


The UK government expects to reach no deal with the EU by the end of the year and as it nears July’s deadline. Cited government sources say it remains possible that a “basic” agreement could be reached if the EU gives ground in the autumn. Britain left the EU on Jan. 31 and its relationship with the bloc is now governed by a transition arrangement that keeps previous rules in place while the two sides negotiate new terms. Negotiators remain deadlocked on fishing rights and the European Court of Justice’s role. Britain is pursuing trade deals with other countries and setting up its own sanctions’ regime, and has previously insisted it should not have to sign up to the bloc’s standards. The British government has also abandoned hopes of signing a free trade deal with the US ahead of their presidential election. Trade minister Liz Truss said last month that Britain had no deadline to strike a trade deal with the United States and she criticised the US administration for talking “a good game” on free trade while restricting import access. Against the British pound, the dollar traded at $1.2719, close to a six-week low. The euro was little changed at 90.90 pence.


The Antipodean currencies took advantage of the greenback’s weakness and pushed higher. The Australian dollar rose to $0.7125, closing in on the highest since April last year. The Australian dollar was further bolstered by strong domestic retail sales data. The New Zealand dollar edged up to $0.6649, approaching the highest since January this year. Australia saw a surge in coronavirus infections which put pressure on bank and travel shares dragging the benchmark index down 1%.


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