By Peter Nurse
The dollar weakened at the beginning of the european session on Thursday, traders looking for currencies to be more risky as a bet on economic growth, which has lowered the demand for safe-haven currency to the u.s. dollar.
Has 10: 10, the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 96,252, a decrease of more than 1% during the past week. The EUR/USD rose 0.2% to 1,1356, while the USD/JPY remained virtually unchanged at 107,27.
“The dollar has a wide range of diving yesterday, which continued all night. The dollar plunged yesterday on a broad base, which continued during the night. This has been particularly visible on the EUR/USD. The pair rose strongly above the level of 1.13, and is closer to the peak from the beginning of June”, said the analysts of the Danske Bank, in a research note.
Persistent concerns about the spread of the coronavirus could keep some currency pairs in a narrow range, but losses in the dollar are gradually increasing as the feeling promotes the bets are riskier on the long-term economic growth.
In this context, attention will turn quickly to the publication of weekly data on unemployment in the United States later in the session. The employment trends have been positive, but some areas have now been forced to slow or reverse the re-openings.
The initial claims for unemployment are expected to rise to 1.4 million for the week ending July 3, which would be roughly equivalent to the previous week.
The finance ministers of the euro area need to come together on Thursday, before a summit of their leaders on 17 and 18 July, with the hope that an agreement will be concluded to allow the stimulus funds to 750 billion euros proposed to be distributed to the economies most severely affected by the crisis of the Covid-19.
The pound sterling has also shown some strength, the greenback has reached its lowest level in nearly three weeks versus the pound. The announcement by the uk government of its latest plan of economic rescue, to the tune of 30 billion pounds sterling, has contributed to this evolution.
The GBP/USD rose 0.3% to 1,2643, although the pound sterling remained virtually unchanged against the euro, to 0,8981.
That said, further gains may prove to be difficult, in particular against the single currency.
“The measures announced today do not alter significantly our growth prospects in the United Kingdom, and as the main engine of the pound sterling (the trade negotiations between the United Kingdom and the EU) still seems uncertain, it is unlikely that the pound sterling continues to move forward,” said analysts at ING (AS:INGA) in a research note.
“We see the EUR/GBP is closer to 0.92 by three months because of the lack of progress anticipated in the current trade negotiations between the United Kingdom and the EU should lead to the integration of a new risk premium in the money”.
The pair USD/CNY slipped 0.2% to 6,9878. The yuan has been stimulated by data on inflation better than expected for the month of June, producer prices declined 3% year-on-year. The decline of the PPI has been less important than that of the previous month (3.7%) and that of 3.2 per cent that analysts had generally expected. The pair is especially supported by the rally in chinese equities, which continued for an eighth consecutive day Thursday.