By Peter Nurse
The dollar weakened at the beginning of the european session on Thursday, the signs of recovery in Europe, reinforcing the feeling that despite the increased tensions between the United States and China.
At 10: 25 am, the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 94.808, just below the lowest level on a four-month 94.773 saw earlier.
The USD/JPY remained virtually unchanged at 107,09, the GBP/USD remained unchanged at 1,2731, while the EUR/USD rose 0.2% to 1,1587, after having reached 1,1593, a highest level in 21 months.
The euro and the general feeling of risk appetite have been promoted by the survey, German Gfk consumer confidence, which has given better results than expected, suggesting that europe’s largest economy is on the road to recovery.
The index estimate of consumer sentiment rose 0.3 in August, which is better than the -5 expected and the -9,6 of July. It has gained nearly 23 points since its lowest level of less than the 23.1 points in may.
This increase followed the adoption by the leaders of the european Union of a recovery plan substantial to help the region recover from the damage caused by the pandemic Covid-19.
It does not remain unless the tone of the appetite for risk is dangerous.
Tensions are intensifying between the two largest economies in the world, the United States has ordered China to close its consulate in Houston, accused of espionage.
“Investors could be put on the defensive Thursday, the market players awaiting possible retaliation of China,” said analysts at ING (AS:INGA) in a research note.
The yuan is a barometer of sino-american relations, and it is now trading around the level to 7.0 after falling to a lowest level in a week 7,0174 per dollar in offshore Tuesday.
Attention will also be focused on the publication of weekly data of initial applications for unemployment benefits at the beginning of the american session, after the publication of the last week have suggested that the improvement in the u.s. job market since April could be losing steam.
The USD/TRY stayed relatively stable at 6,8482 before the last meeting fixing of rates by the Turkish central bank.
Most market players expect the bank leaves the key rate unchanged at 8.25% for a second month, but the pressure increases on it so that it starts to increase borrowing costs to the extent that the inflation outlook deteriorate.
“With the recovery in domestic demand and increased pricing pressures, the next step will be an increase,” said analysts from JPMorgan Chase in a research note, reported by Bloomberg. “We expect the first hike in the first half of 2021, but a resumption of stronger demand than expected could lead to increased risks to price stability and financial stability, which would encourage the central bank to act sooner”.