The Dollar is strengthening while a new wave of virus to cause an aversion to risk

By Peter Nurse

The dollar has slightly strengthened in the early european trade Friday, as investors sought the safe haven in the fear of a second wave of the epidemic Covid-19 and the possibility of new bottlenecks to slow the spread.

At 10h35, l'{8827|dollar index}}, which tracks the greenback against a basket of six other currencies, rose slightly to 96,743. The USD/JPY rose 0.3 % to 107,12, while EUR/USD gained 0.1% to 1,1307.

These fears have increased, the United States has reported over 2 million cases of Covid-19 to 12 June and a number of States most populous countries have reported an increase in the number of infections.

“Three of the most populous States, California, Texas and Florida, are all facing high levels of new infections and the Texas and Florida have experienced a new increase recently,” said the analysts of the Danske Bank, in a research note. “This might frighten the markets with regard to the control of the virus and the pursuit of standardisation, including an increase in spending”.

That said, “the bar to turn back to the lock seems to be very high, however. Especially in the United States, where there is a strong opposition in this matter,” said Danske.

In addition, the market had digested yet a grim picture of the u.s. economic recovery painted by the us federal Reserve after the conclusion of its policy meeting on Wednesday.

The british pound weakened after data showed the british economy contracted by 20.4% in April compared to march, while the country has spent the month in a situation of total isolation in the face of the sars coronavirus.

“At the same time, the news of the Brexit does not seem encouraging”, said Danske, “because the United Kingdom and the european Union still seem to be very distant one from the other.”

The Financial Times reported on Thursday that the high-level summit between the british Prime minister Boris Johnson, the president of the european Commission Ursula von der Leyen and president of the european Council, Charles Michel is expected to take place on 15 June.

The GBP/USD fell 0.1% to 1,2583 and the EUR/GBP gained 0.3% to 0,8986.

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