A strong bounce in the U.S. dollar’s performance this week, likely a reaction to a shift towards a negative economic outlook from the Fed and as reports of spiking coronavirus cases popped up around the country.
United States Headlines and Economic data
On top of the central bank stimulus and potential additional government stimulus, risk sentiment leaned positive at the start of the week (likely on the recent “reopening” trade) to possibly contribute to the Greenback’s weakness.
Dollar performance diverged during the London session, likely on rising negative risk sentiment that may have stemmed from weaker-than-expected European trade data (e.g., German Exports in April 2020: -31.1% on April 2019) or geopolitical tensions (North Korea cuts communications with South Korea, Pompeo demands Iran release US detainees, urges Libya ceasefire).
The Fed’s latest statement and dovish economic outlook sparked a broad risk-off move in the financial markets, and kicked off the U.S. dollars recovery against most of the majors.
Negative global risk sentiment accelerated during the U.S. session, likely as fears of a second wave (Florida Reports Highest Daily Increase in Coronavirus Cases Since Outbreak Began) were are added on top of the Fed’s dismal outlook.
Positive global risk sentiment recovered during the Asia and London trading sessions (possibly profit-taking?) to send the Greenback lower against the risk currencies and a bit higher against the Japanese yen and Swiss franc.
But global sentiment swung back to negative later prompting a reversal of the session’s mixed performance earlier, likely on fears of a second wave and a re-implementation of lockdown protocols as seen in the links below.