Forex News Roundup For July 11th, 2020

FX News Roundup: US Dollar Strengthens As Flight to Safety Continues, GBP Also Posts Gains

In this edition, we cover yet another round of investor inflows towards the US Dollar (USD) due to concerns of the Covid-19 pandemic spiraling out of control in the US. We also take a look at the Great British Pound's (GBP) performance over the past week.

USD Continues to Be Safe Haven Asset of Choice

Demand for the US Dollar has surged in recent days as investors looked to move their capital to safer assets as sharply rising Covid-19 cases and deaths in the US prompted a number of States to reverse decisions to ease their lockdown measures in a bid to revive the economy.

The US has by far the greatest number of Covid-19 cases globally, with over 3.2 million confirmed cases of the virus and in excess of 135,000 deaths.

This is not the first time we have seen the USD proving to be very closely correlated to the development of the Covid-19 pandemic – both within the US and abroad.

Specifically, we have seen the US Dollar appreciate in response to a worsening of the pandemic, both in terms of cases or the economic shocks it has brought about. On the other hand, we have seen the USD depreciate relative to other currencies following positive economic news and reports of stock market gains.

The US Dollar is currently also being supported by tensions between Washington and Beijing over a slew of key issues, from trade to human rights abuses and the detention of China's Uighur population in parts of the country.

However, despite the Greenback posting gains against various currencies (especially risky Emerging Market currencies) following the turn for the worse, the USD is still over 1 percent off its recent high against the Euro (EUR), which was reached in the middle of last month.

GBP Continues to Fluctuate

The Great British Pound had a pretty good five days starting July 6, with sterling gaining against many of its main currency rivals, such as the Euro and the US Dollar. These gains were primarily driven by the UK government announcing new measures as part of its economic stimulus package to help get the economy back on its feet post-COVID.

FX analysts are divided in opinion over whether or not the GBP will continue to appreciate in the global currency exchange market.

However, everyone can agree that Brexit negotiations between the UK and the European Union (EU) will continue to be an important determinant of sterling's value. At the same time, the rate of the British economy's recovery will also be a pivotal development to monitor.

A Quick Summary

• Yet again, we have seen the US Dollar appreciate in response to the worsening of the Covid-19 pandemic in parts of the United States.
• Many States were forced to backtrack and reverse plans to ease lockdown measures due to surging coronavirus cases, leading to investors growing increasingly concerned about the state of the pandemic in the country.
• Persisting tensions between the US and China are also supporting the USD against many of its rival currencies, as a further escalation of hostilities could spell even more bad news for the global economy, leading to greater demand for safe haven assets like the Greenback and gold.
• On the other side of the Atlantic, the Great British Pound has been performing well due to the UK government continuing to add billions of pounds to its economic stimulus package.