Expectations that the global economy recovers swiftly from the coronavirus pandemic took a beating after the United States central bank policy meeting. So, on Thursday, the dollar increased from a three-month low, which the United States currency hit in the previous session.
The Federal Reserve is signaling that it plans years of extraordinary support for the economy of the United States. The policymakers are forecasting that the economy will shrink by 6.5% in 2020. Moreover, the project that the unemployment rate will be at 9.3% at the end of this year. There are forecasts that interest rates will remain near zero until the end of 2020.
Dire projections took the wind out of broadening rally in the markets of stock over the previous two weeks. THUs, sent investors scurrying to the relative safe-haven appeal of the United States currency, yen, and Swiss franc.
The United States Dollar
Against a basket of its rival, the US dollar edged 0.3% higher to 96.3. Stocks of the United States futures fell more than 1%, and Asian stocks weakened. So, from a three-month low overnight, the United States dollar recovered.
A new round of infections in the United States showed a slight increase after five weeks of declines. Thus, the sentiment of the market also took a hit. According to an analysis of Reuters, only a part of those cases was attributed to more testing.
Marshal Gittler is head of investment Research at BDSwiss Group. Gittler said that the risk of a second wave outweighed the zero-forever message made by the Federal Reserve. Furthermore, with a typical reaction, the forex market took a distinctly risk-off mood.
Currencies of the high beta were heavily geared toward global growth. For instance, the Australian dollar and Norwegian Crown led the losers in the forex space. They decreased by 1% in early London trading.
It is the current news of the market.
