By Peter Nurse
The dollar fell in early european trade on Wednesday, but the ranges are tight as investors try to digest a combination of economic data optimistic of a prognosis of the president of the federal Reserve, concerns about a second wave of Covid-19 and diplomatic tensions in Asia.
Has 10.55, the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 96,852. The EUR/USD rose 0.1 %, to 1,1264.
The AUD/USD risk-sensitive has increased from 0.2% to 0,6897. The GBP/USD remained almost unchanged at 1,2570 after a period of low inflation of consumer prices and production, which could increase the chances of further monetary easing at the meeting of the Bank of England on Thursday.
Consumer spending in the U.s. rebounded in may, retail sales increased by nearly 18 %, the biggest monthly increase recorded since 1992, although it had the largest decline ever recorded in April. This data point is the latest sign that the worst of the economic shock of the pandemic could be spent.
The federal Reserve chairman, Jerome Powell, has put a damper on any enthusiasm by painting another grim picture of the u.s. economy to Congress. His testimony continues later Wednesday.
The witness’s semi-annual chairman Powell on monetary policy before the Senate reinforces the idea that if the Fed is encouraged by the recent data flow as the economy is re-launching, we are far from the “normal” and this will not happen; there is the confidence that we have overcome the Covid-19, said analyst James Knightley at ING (AS:INGA), in a research note.
Yet, Beijing is struggling to contain a new outbreak in the chinese capital, while in the United States, infections reach record levels in the six States.
In addition, tensions rose between China and India, with clashes on a site border challenged who were 20 deaths among the indian soldiers and an undetermined number of victims in china.
Nevertheless, the decline of the greenback on Wednesday could prove to be the precursor to a movement much more important, if we are to believe Stephen Roach of Yale university and former chairman of Morgan Stanley (NYSE:MS) Asia.
Roach has predicted Monday, a 35% decrease of the u.s. dollar compared to its main rivals in the near future, citing the increase in the deficit of the nation and the reduction of savings.
He added that the rise of China and the decoupling of the United States from their trading partners will probably put an end to the supremacy of the dollar as the global reserve currency.