Overview of the foreign exchange market for the week

At the end of the week all major currencies showed a decline. The largest decline against the US dollar showed new Zealand dollar (-3,36%). The least fall recorded British pound (-2,31%), Australian dollar (-1,77%), canadian dollar (of -1.29%), Japanese yen (-0,59%), Swiss franc (-0,24%) and the Euro (-0,20%).

On Monday, the U.S. dollar rose against the Japanese yen and the Euro, as investors worried that the economic recovery may be slower than expected. Against this background of increased demand for the American currency, which is seen as a safe asset. Investors have adjusted their expectations according to the risk given the warnings about the second wave of infection COVID-19, as more countries have eased restrictions on locking. Germany said on Monday that the number of novel coronavirus infections is accelerating exponentially after the first of the steps to ease locks. The news triggered a global concern, at the time when I opened many businesses — from Paris to Shanghai. In South Korea there has also been growth in the number of infections to a month high. Japan said on Monday, may terminate a state of emergency in many regions this week, as New Zealand announced that it will loosen restrictions on Thursday. The UK also announced plans to weaken the lock, while in France, the stores opened again on Monday. Investors are also awaiting the speech of the fed Chairman Powell on Wednesday, as well as data on inflation, unemployment and retail spending in the United States. In addition, the global risk sentiment pressured the prospect of worsening tensions between the United States and China.

On Tuesday, the US dollar fell, as investor risk appetite increased, helped by continued actions of the Federal reserve system of the USA on struggle with the economic devastation caused by the pandemic as well as potential therapies, which, according to the world health organization, limit the severity of respiratory disease COVID-19. Even a small hint of positive news about the coronavirus has limited the attractiveness of the dollar as a safe-haven currency, although the decline was restrained by a growing fear of a second wave of infections. Informed of the renewed tensions in trade between the US and China has supported the U.S. dollar. The fed on Tuesday began a long-awaited programme to buy corporate bonds and exchange-traded funds that track them. Risk appetite also improved after the who said that some treatment methods are likely to limit the severity or duration of the disease COVID-19 and what she focused on to learn more about the four or five most promising of them. However, the increasing thrust towards risk was restricted by constant fears about the current global health crisis. Novel coronavirus infection was discovered in China, South Korea and Germany, where the government loosened restrictions on locking. The reappearance of cases of coronavirus could undermine the global economic recovery due to the introduction of monetary and fiscal stimulus.

On Wednesday, the dollar trimmed earlier losses and moved into positive territory after Federal reserve Chairman Powell rejected the idea of using negative interest rates as a tool of stimulus, despite the fact that it is very darkly expressed respect to the prospects for economic growth. Speaking at a web event of the Peterson Institute for international Economics, Powell said that the country could face «long period» weak growth. According to him, the recovery may take some time, depending on progress in the fight against the pandemic coronavirus. Powell said that the fed at negative interest rates have not changed, and it's not what I'm looking at policy. After the speech, Powell's traders short-term interest futures U.S. pared bets that the fed will go on an unprecedented step and cut interest rates below zero. However, futures contracts with maturity in April 2021 and later still signalled expectations of negative rates, according to CME Group FedWatch tool.

On Thursday, the U.S. dollar rose to three-week high as stock markets generally weakened after the Chairman of the Federal reserve system Jerome Powell dismissed speculation about moving US interest rates to negative territory. Recent comments of a leading American infectious disease expert Anthony Fauci, the warning about the premature cancellation of locks, which can lead to additional outbreaks of coronavirus, also undermined market sentiment. The US President Donald trump said Thursday that he is disappointed with China over its failure to contain the coronavirus, and pandemic has cast a shadow on the trade deal between the US and China. His comments caused concern over the resumption of tensions in trade between the US and China. However, data showing that millions more Americans filed applications for unemployment benefits last week, only strengthened bets on the dollar. For the week ended 9 may, initial applications for unemployment benefits totaled a seasonally adjusted 2,981 million. It was less than 3,176 million in the previous week, and was the sixth weekly decline in a row.

On Friday, the U.S. dollar was almost unchanged against the major currencies, but was preparing to record a small weekly gains as the threat of a second wave of coronavirus infections has shocked investors, as well as many gloomy economic data in the United States. Safe-haven assets including the US dollar received support after retail sales in the U.S. experienced a second straight month of record declines in April, since the new pandemic coronavirus kept Americans at home, putting the economy on the path the largest reduction in the second quarter since the great Depression. The collapse in retail sales reported by the Commerce Department on Friday added to the historical loss of 20.5 million jobs in the last month, underlining a deepening economic downturn, which analysts warn may require years, the economy has recovered. The fed Chairman Powell on Wednesday warned of a «extended period» the weak growth and stagnant incomes. Meanwhile, new infections COVID-19 was registered in countries which have loosened restrictions on the lock which reduced the previous optimism of investors on the fact that the economy may soon return to normal. The pound fell markedly against the dollar and reached the lowest level since March 26, after the leading negotiator of the European Union on Bracito Michel Barnier said that the third round of talks with the UK about the new partnership was «disappointing».

Information-analytical Department TeleTrade

Source: teletrade.ru

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