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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.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart
USD Weekly Performance from MarketMilk
USD Weekly Performance from MarketMilk

United States Headlines and Economic data

Monday:

Fed expands Main Street lending program to allow smaller, bigger loans

Trump open to another coronavirus relief package: White House

The U.S. entered a recession in February, according to the official economic arbiter

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.

Tuesday:

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 U.S. NFIB small business optimism index rose to 94.4 in May from 90.9 in April

Job Openings and Labor Turnover Survey: The number of total separations decreased by 4.8M to 9.9M in April, the U.S. Bureau of Labor Statistics reported today.

US Wholesale inventories were up 0.3% m/m to $650B at the end of April

Wednesday:

U.S. consumer prices dipped 0.1%, falling for a third straight month

Fed sees interest rates staying near zero through 2022, GDP bouncing to 5% next year

Fed head Powell: U.S. faces long road to recovery

Here’s what changed in the new Fed statement

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.

Thursday:

US weekly jobless claims total 1.542 million, vs 1.6 million estimate

U.S. Producer Price Index for final demand rose 0.4 percent in May

Treasury Secretary Mnuchin says ‘we can’t shut down the economy again’

Mortgage rates set new record low, falling below 3% as concerns rise about coronavirus second wave

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.

Friday:

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.

U.S. Consumer Sentiment Jumps Most Since 2016 on Gain in Jobs

CDC warns U.S. may reimplement strict coronavirus measures if cases go up ‘dramatically’

More U.S. cities and states are sounding the alarm over spikes in coronavirus cases