The Dollar strengthens; the German data disappoint

By Peter Nurse

The dollar has slightly strengthened at the beginning of the european session on Tuesday, reversing earlier losses, traders are taking the side of the safe-haven securities as the recovery in German industrial output has been less impressive than expected in may.

At 10: 10am, the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 96,896.

The EUR/USD fell 0.2% to 1,1290, the GBP/USD fell 0.1% to 1,2477, while the USD/JPY rose 0.2% to 107,54.

German industrial output rebounded in may, increasing by 7.8% on the month after a revised drop of 17.5% in April. However, this recovery has been more modest than the 10% increase widely expected.

Despite the recovery, output is still well below the levels recorded before the onset of the crisis of coronavirus. The production in may was down 19% in terms adjusted for seasonal and calendar effects compared to February, the months preceding the imposition of containment measures.

The increasing number of cases of Covid-19, with more than 11.5 million reported cases in the world the 7 July, according to data from the Johns Hopkins university, has also contributed to the demand for greenbacks.

The dollar fell sharply on Monday, the data on the u.s. services, better than expected, that strengthened investor expectations for a faster economic recovery.

A number of speakers from the federal Reserve are expected later Tuesday, including Raphael Bostic, Mary Daly and Thomas Barkin. The market will monitor comments with regard to the plans of the Fed in terms of quantitative easing and future direction.

AUD/USD fell 0.4% to 0,6943, after the second State is the most densely populated of Australia has announced a ban of six weeks on the metropolitan area of Melbourne after the pandemic of sars coronavirus.

The reserve Bank of Australia has kept its discount rate at 0.25% and made no changes to its policy at the meeting on Tuesday.

“We expect that the RBA reiterated that the australian economy is doing better than we feared, and that any increase in the discount rate will only be in a few years,” said Joe Capurso, an analyst from the Commonwealth Bank of Australia (OTC:CMWAY), to CNBC.

But he added that “the main downside risk for the AUD/USD are escalating tensions between the United States and China and the risk that the sub-partials are becoming commonplace”.

The USD/CNY rose 0.1% to 7,0207, the dollar having bounced back after the yuan reaches its highest level in nearly four months after the sharp increases seen in the chinese equity markets.

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