By Peter Nurse
The dollar fell further in early trading in Europe Friday, as the probable adoption of a plan of 2.2 trillion u.s. dollars helped to calm fears of a global recession following the outbreak of coronavirus and also seemed to be a need to significantly increase the balance sheet of the federal Reserve.
At 11: 00, the u.s. dollar index, which tracks the greenback against a basket of six other currencies, was $ 99,620, bouncing a little after the heavy losses recorded during the night.
It is trading below the 100 level for the first time since the 18th of march, a decrease of approximately 4% compared to last week. If this is maintained until the end of the exchanges in the United States, this would mark the largest weekly drop since 2009.
EUR/USD is traded at 1,1005, down 0.2%, while USD/JPY has fallen 0.7% to 108,83. The book has also reached its highest level against the dollar in 10 days, increasing up to 1,2256$ during the night. She then folded 1,2210$.
The stimulus plan of 2 trillion u.s. dollars should be voted on by the House of representatives later on Friday, and Jerome Powell to the Fed – while conceding that the United States “may well already be in recession” – has insisted on the fact that the central bank still had plenty of ammunition after having accelerated its program of buying bonds in the beginning of the week.
This has raised expectations that the central bank seeks to strengthen its recent recovery plans – especially after an unprecedented increase in applications for unemployment benefits in the United States has noted the impact of the virus on the economy.
“It is interesting to note that the program of expenditure of the United States includes more money for the currency stabilization Fund, the u.s. Treasury uses to inject money into the various credit programs of the Fed,” said the analysts of the Danske Bank, in a research note. “This means that the various credit programmes of the Edf can be extended significantly if necessary.”
New data for the Fed’s balance sheet show an increase of $ 586 billion to $ 5 254 billion, a new record, because of the new programs of the credit and liquidity from the Fed and the increase of bond purchases, has been added to Danske. “The balance sheet is expected to increase further in the near future for the same reasons.”
The pair EUR/USD has broken above 1.10 and in the short term, it could trade in the range 1,10-1,12, said Danske.
“We continue to see the numbers of coronavirus, reaching a peak during the next few weeks, the financial stress decreases with the economic aid of the fiscal policy of the world.”