Caution kept investors from aggressively buying riskier currencies like the Australian dollar. Nevertheless, the United States retail sales increased more than was forecasted in May. Thus, on Wednesday, the United States dollar remained little changed.
Jerome Powell is the United States Federal Reserve Chairman. On Tuesday, he doused some of the optimism of the market with a rather bleak picture of the United States economy. On the other hand, he reinforced hopes for the continued support of the policy.
There are record-high coronavirus infections in six U.S. States. In Beijing, there are also new coronavirus cases. Meanwhile, clashes between Chinese and Indian troops in the western Himalayas took place. This is all of the discouraging news over the past 24 hours and it has undermined sentiment.
The dollar edged 0.1% lower to 96.89 against a basket of other currencies. After reaching a three-month low last week, the index has bottomed out. As such, the broad outlook is remaining pessimistic.
Dollar
Kazushige Kaida is head of FX sales at State Street. He said that market players are looking, with caution, at how critical the impact from a second wave of infections will be on the economy. It may be that that markets will notbe pessimistic. Nevertheless, the length of time people are holding their positions is getting shorter and shorter.
Until the American people are uncertain that the novel coronavirus epidemic has been brought under control, a full United States economic recovery will not occur. That is what Federal Reserve’s Powell said.
Control over coronavirus remains far from a certainty. Moreover, new coronavirus infections are rising to record highs in six U.S. states on Tuesday. This includes highly populous states like Texas and Florida.
On Tuesday, China sharply ramped up restrictions on people leaving Beijing. This is an effort to stop the worst coronavirus flare-up since February from spreading any further.
The cautious message from the Federal Reserve checked the momentum in the euro. It held below the three-month high of $1.1422 reached last week.
