Forex – Dollar Weakens; Lack of Stimulus Continues to Weigh

The dollar edged lower in early European trade Friday, with attention still focused upon the lack of a new relief package to help the U.S. economy recover from the damage caused by the coronavirus outbreak.

At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 93.235, set to continue a seven-week losing streak. USD/JPY was down 0.1% at 106.84, GBP/USD was flat at 1.3062 and EUR/USD was also flat at 1.1812, ahead of eurozone GDP data for the second quarter later in the day.

The U.S. said on Thursday that the number of unemployment claims over the past week dipped below the one million mark for the first time since the COVID-19 outbreak. 

But the news was overshadowed by the grim reality that more than 30 million Americans are out of work, as well as the suspension of negotiations over the latest U.S. stimulus measures as the Senate wrapped up its session on Thursday.

This suggests that the fight for a new package is likely to drag until September, drawing dangerously close to the period when Washington shuts down to fight the national election.

At the same time the United States faces a “gruesome” fall with a further rise in coronavirus case numbers, a Yale School of Medicine epidemiologist told Politico Thursday.

“The fall could be incredibly gruesome,” Gregg Gonsalves said, arguing that the White House’s handling of the pandemic in recent weeks has left the U.S. no more protected than it was back in June.

The U.S. retail sales release, at 8:30 AM ET (1230 GMT), will be of interest, with the numbers expected to have increased in July, though nowhere near the May and June jumps.

Oxford Economics noted, in a tweet, that its U.S. recovery tracker fell in the last week of July, with declines in demand, health, and mobility outweighed modest improvements in financial markets, production, and employment. 

“The sugar rush from reopenings has clearly faded, with the tracker having fallen five times in the past eight weeks. It’s evident the economy won’t make further real inroads toward recovery until a medical solution to the pandemic is found,” the  global forecasting group said.

Elsewhere, the Turkish lira tested record lows again in early trading, as reports spread of a clash between Turkish and Greek warships on Thursday. By 3 AM ET, the lira was at 7.3613 to the dollar

Source: Reuters

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