The U.S. dollar is headed for its best weekly gain of the month. It is more precisely what happened on Friday. This is due to soaring cases of coronavirus and uncertainty over progress towards US stimulus. The situation has made investors nervous about finding safe assets.
When new restrictions to combat the COVID-19 virus were introduced in Europe and the UK, the US dollar continued to surge to a two-week high of 93.910 against major currencies. The dollar looks very strong and also dominates in the world market today.
For information, the city of London is entering a tighter COVID-19 lockdown period starting at midnight. Then, the enactment of the curfew rules in Paris made the two largest cities in Europe live under these restrictions. It remains unknown how long this rule will last.
Positive Cases Soar in Winter
The US is now also battling a record surge in new cases of coronavirus as temperatures get colder. The condition prompted authorities to set up a field hospital in suburban Milwaukee, Wisconsin. This anticipatory step is necessary if the patient overflows from the hospital ward.
The market is very afraid of slowing activity as new cases of the virus increase. It was delivered by ANZ bank analysts Susan Kilsby and David Croy in a note. The downturn is evident everywhere across Europe and is a major blow to some sectors.
This is mainly for recovery momentum and further strengthening the risk of deflation. Sensitive currencies are at risk of having a stronger impact. An example is an Australian dollar which fell almost 1% on Thursday to its lowest level. This happened for more than two weeks at $0.7057.
In addition, the situation was also weighed down by the central bank's dovish speech. The kiwi fell 1% on Thursday to $0.6577. The euro was also reportedly down as much as 0.3% against the dollar overnight and has lost about 1% for the week.
USD is Still Dominating
The US dollar has gained as much as 0.8% against major currencies this week. This was the biggest weekly gain since late September. On Thursday, the demand for the USD pushed the safe-haven yen lower. That was despite the Japanese currency rising 0.2% for the week.
The yen was last known to be steady at 105.38 per dollar. The lockdown concerns that prompted the sell-off came as hopes for US stimulus before the November 3 election faded. In addition, unemployment claims in America also exacerbate existing conditions.
U.S. weekly jobless claims rose more than expected and hit their highest in two months. It was happened last week and made people afraid that this situation creates the permanent impact on labor. About 25 million Americans even get unemployment benefits.
Economic Recovery is Still Heavy
The data is consistent with the idea that the spread of COVID-19 and the elimination of fiscal stimulus have slowed the economic recovery. This opinion was conveyed by NAB FX strategist Rodrigo Catril. The world is still battling pandemics today.
Meanwhile, plans for stimulus are still stalled in three-way negotiations between the White House, Senate Republicans, and House Democrats. President Donald Trump told that he is agreeing to raise the bid of $1.8 trillion for the coronavirus aid deal.
However, the idea was later overturned by Republican Senate Majority Leader Mitch McConnell. Sterling was also widely sold overnight and fell more than 0.8% to $1.2891. This comes amid concerns about barriers blocking the EU and THE UK over Brexit.
Many analysts doubt since it is very difficult to reach a Brexit trade deal. According to the data, Sterling was last at $1.2902. Brexit is still under discussion. In fact, Boris Johnson made a statement that markets must be prepared with a no-deal Brexit.