Monex: Safe haven dollar strengthened by growing virus concerns
Monex: Safe haven dollar strengthened by growing virus concerns
The dollar as safe haven dollar is strengthened by growing virus concerns strengthened by growing virus concerns. The following is a brief commentary in English from Ima Sammani, Currency Analyst at Monex Europe on the U.S. dollar, the euro and the British pound.
EUR
With risk sentiment having dissipated going into this week, the euro struggled to hold onto gains against JPY and USD this morning while the currency performed better against other procyclical currencies which rely more on market sentiment, such as the Antipodeans and petro-linked currencies.
All focus will be on the European Central Bank in the coming two weeks, after ECB President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days, and indicated that fresh monetary measures may be brought in next year to support the eurozone economic recovery after the Pandemic Emergency Purchase Programme ends in March 2022.
Her comments come after the ECB concluded its strategy review last week in a press conference held after a surprise multi-day strategy meeting. In the background, virus cases in the eurozone have been rising which called for a tightening of measures in some countries as herd immunity is not yet achieved and the delta variant continues spreading.
The Netherlands had eased restrictions on nightlife less than a month ago in the hope that cases could be kept to a minimum if entrances to clubs would require a negative test. This was reversed over the weekend, as cases spiked especially in young adults.
USD
Risk sentiment turned sour this morning, driving high-beta G10 FX lower and safe haven currencies such as the US dollar higher as virus matters remained front and central.
New daily COVID-19 cases jumped by 45% in Sydney while the Netherlands tightened containment measures again over the weekend after testing policies used at clubs and indoor events failed to keep the case count low.
Federal Reserve Chair Jerome Powell’s semi-annual congressional testimony on Wednesday and Thursday will play a key role in determining the next leg of a directional move for the US dollar while markets focus on developments around Covid-19 in the background as well until vaccinations globally reach further stages.
GBP
After rebounding over 1% from low to high on Friday, sterling kicked off the new week on the back foot against the US dollar amid broader USD strength this morning while trading flat against the euro.
Prime Minister Boris Johnson is expected to address the nation today at 17:00 BST to confirm the loosening of the remaining lockdown measures on July 19, including the legal requirement to wear masks indoors.
Johnson will likely also warn that the loosening will lead to an imminent further increase in cases and that people must take responsibility in the coming weeks to help keep control of the case count.