By Peter Nurse
The dollar decreased at the beginning of the european session on Friday, but the ranges of trading have been tightened as traders attempt to weigh the conflicting forces of a continuing economic recovery with the increased tensions on the decision of China to strengthen its control over Hong Kong.
At 10.30 am, the us dollar index, which tracks the greenback against a basket of six other currencies, stood at 98,300, down 0.1%, while USD/JPY has dropped 0.3% to 107,27 and that the GBP/USD declined 0.1% to 1,2306.
In April, germany’s retail sales fell at their fastest pace since 2007, according to data released on Friday, but down 5.3% on the month – has not been as strong as expected, which is a testament to the relative strength of the largest european economy during the crisis of the sars coronavirus. The figures for march were also revised to reflect a lower more moderate.
In the United States, the first data on unemployment claims Thursday showed that more than two million Americans sought unemployment benefits for the first time last week. This is another number that terrible, but the weekly totals have continued to decline since they reached a peak of 6.8 million by the end of march.
“For the moment, the hopes of economic recovery are strong, but I expect that it fades gradually in favour of a growing concern about the relationship between the United States and China,” said Minori Uchida, head of market research the world bank MUFG in Tokyo.
“When this happens, there will be more risk transactions, which will enable the purchase of the dollar and the yen”.
At this time, the currency markets are holding their breath in anticipation of the declaration of the american president Donald Trump in response to the adoption by the chinese parliament of a law against sedition on Hong Kong.
“The question is how far Trump will go at the press conference today, because the removal of the privileged status of Hong Kong would likely trigger a negative evolution of the market, which would affect the risk sentiment at the global level”, said the analysts of the Danske Bank, in a research note sent to clients.
At 10.30 am, USD/CNY has traded to 7,1515, which is not far from the record of 7,1966 reached Thursday.
The euro continued to strengthen Friday, under the effect of an increased confidence in the global economy, but also because the institutions of the EU are beginning to agree that an attitude of adaptability is in fact necessary, particularly in terms of fiscal policy.
“We consider that the latest proposals of the european Commission for an increase in the EU budget and stimulus funds of 750 billion euros could change that,” said the analysts of Barclays (LON:BARC) in a research note.
At 10.30 am, EUR/USD was trading at 1,1110$, up 0.3%, after having achieved the level of 1.11 usd for the first time since the end of march.
