U.S. Dollar Remains Firm
The U.S. dollar was unchanged on Thursday as FX market subdued due to investors holding fire on near-term event risk.
The U.S. Dollar Index, stood at 100.165, largely flat, while EUR/USD was up 0.1% to 1.0861. Moreover, GBP/USD was flat at 1.2385 while USD/JPY rose 0.1% to 108.95.
The United States biggest concern is its weekly jobless claims. It has become the economic indicator to capture the latest impact of the novel coronavirus.
Economists anticipate that claims eased off a little from 6.65 million the week before. But it will still post a rise of 5.25 million to join the almost 10 million Americans who have submitted.
Tohru Sasaki, head of Japan market research at JPMorgan said markets already know that economy is hit by extraordinary shocks. Even if unemployment increases, it will probably surprise a few people.
A better result could enhance perception that the worst may be over. It could also trigger a bigger market reaction.
The OPEC Meeting
Another factor for the U.S. dollar movement will be the meeting of the Organization of the Petroleum Exporting Countries. The meeting will attempt to balance an oversupplied oil market following the slump in global demand due to COVID-19.
Historically, the price of oil is inversely related to the price of the USD. When the U.S. currency is strong, you need less to buy a barrel of oil.
However, the oil price has also become a function of the demand destruction caused by the pandemic. The more the global economy shuts, the more oil falls and the more the dollar appreciates as a safe haven.
Major oil producers getting together to agree to cut supply potentially raises the price of crude, adversely impacting the dollar.
The U.S. Dollar and Euro in Forex
Eurozone finance ministers are getting together to reach an agreement on the best regional strategy for financing crisis mitigation measures.
Whether to issue joint debt known as coronabonds as part of a wider recovery plan remains in disagreement.
ING said a move towards debt mutualization seems unlikely at this point. The impact on the EUR/USD should be limited as expectations are not high for the coronabond anyway.
Right now, the fiscal risk premium is not the main driver of the euro. Stabilizing risk appetite should ease appreciation pressure on the dollar, ING added.
Meanwhile, in other forex news, USD/CAD holds steady near mid-1.4000s, focus remains on OPEC+ meeting.
Following the previous session’s intraday pullback, the pair managed to regain some positive traction for the second straight session. This was amid a subdued trading action on Thursday.
