U.S. Dollar Drops On Improved Risk Sentiment

By | May 12, 2020

The U.S. dollar fell against its major rivals in the European session on Tuesday on safe-haven status, as investors focused on upbeat earnings reports and a phased reopening of New York State on Friday.

Governor Andrew Cuomo announced on Monday that certain parts of the state will be permitted to resume business operations later this week, including construction and retail sectors.

New York will loosen restrictions on some low-risk businesses, which include drive-in theaters and certain recreational activities.

Consumer prices in the U.S. decreased in line with economist estimates in the month of April, according to a report by the Labor Department.

The Labor Department said its consumer price index slid by 0.8 percent in April after falling by 0.4 percent in March.

The drop by the index, which matched economist estimates, reflects the largest monthly decline since December of 2008.

Excluding food and energy prices, core consumer prices fell by 0.4 percent in April after edging down by 0.1 percent in March. Economists had expected core prices to dip by 0.2 percent.

Investors await speech by Philadelphia President Patrick Harker about the economic impact of COVID-19 at the Delaware State Chamber of Commerce, in Wilmington, due at 10:00 am ET.

Fed Governor Randal Quarles will testify before the Senate Banking Committee on supervision and regulation at the same time.

The greenback appreciated against its most major counterparts in the Asian session on safe-haven status, as fears of a second wave of virus infections intensified after the fresh rise in cases in China and South Korea.

The greenback weakened to 1.2378 against the pound, after rising to 1.2287 at 8:30 pm ET. Immediate support for the greenback is found around the 1.25 level.

Bank of England Deputy Governor Ben Broadbent said that the central bank is likely to consider more monetary easing in future after weighing the side-effects of negative interest rates, to help the UK economy recover from the historic shock dealt by the coronavirus, or Covid-19, pandemic.

The Monetary Policy Committee is “certainly prepared to do what is necessary” despite downside risks, Broadbent told CNBC in an interview.

The greenback fell to a 4-day low of 1.0865 against the euro, down from a 5-day high of 1.0784 set in the previous session. The greenback may locate support around the 1.10 level. The greenback pulled back to 107.31 against the yen, after having appreciated to 107.69 at 6:30 pm ET. If the greenback slides further, 105.00 is likely seen as its next support level.

Preliminary data from the Cabinet Office showed that Japan’s leading index fell to the lowest level in more than ten-and-a-half years in March.

The leading index, which measures the future economic activity, fell to 83.8 in March from 91.9 in February.

The greenback eased off to 0.6536 against the aussie, 0.6124 against the kiwi and 1.3972 against the loonie, from 5-day highs of 0.6432, 0.6041 and 1.4065, respectively hit in the Asian session. The greenback is likely to challenge support around 0.70 against the aussie, 0.64 against the kiwi and 1.33 against the loonie.

The USD/CHF pair logged a weekly low of 0.9666, compared to the Asian session’s 5-day high of 0.9750. Further downtrend may take the greenback to a support around the 0.94 region.

The U.S. monthly budget statement for April is set for release in the New York session.


Leave a Reply