US dollar
The US dollar has been extending its sell-off, falling to multi-month or multi-year lows against major currencies. Historically low GDP, the Fed’s readiness to do more, uncertainty about fiscal stimulus, and another rise in COVID-19 deaths are in play. Additional US figures and end-of-month flows are eyed.
US GDP plunged by 32.9% annualized in the second quarter. While it beat estimates, the historic fall weighed on the dollar. GDP was compounded by a worrying increase in continuing claims to above 17 million in the week ending July 17.
US coronavirus cases have stabilized just under 70,000 while the daily death tolls continue rising, with the seven-day rolling average topping 1,200. President Donald Trump floated the idea of postponing the elections due to the virus – seemingly to divert attention from the GDP data – and triggered a backlash from rivals and from his own party.
EUR/USD has flirted with 1.19 – the highest since June 2018, despite the worse-than-expected German GDP – falling 10.1% in the second quarter. GBP/USD is above 1.31 even though the British government implemented new restrictions in northwest England encompassing around 4.3 million people. USD/JPY is trading closer to 104.
WTI oil prices dipped below $40 on Thursday but have recaptured the round level, currently sitting at $40.16. Political uncertainty in the US and growth concerns could keep oil under pressure.
Gold is currently trading above $1,970 per ounce, representing a 10.5% gain on a month-to-date basis, having hit a record high of $1,981 on Tuesday.
End-of-month flows may trigger more volatility than normal given the dollar’s decline in recent weeks and especially in the past few days. Preliminary inflation figures from Europe, coming at 09:00 GMT will likely remain depressed, with the headline hovering around 0% and core prices below 1%. US Personal spending and personal income for June and the University of Michigan’s final consumer sentiment figures for July are all lined up on Friday at 12:30 GMT and 14:00 GMT respectively.