Forex News Roundup For July 28th, 2020
Forex News Roundup: USD Continues to Fall As China Tensions Grow, Covid-19 Continues to Hamper Economy
Currency Converter Calculator's Forex News Roundup aims to help FX traders and enthusiasts keep abreast of the latest developments in the international currency exchange market, with a focus on the major currency pairs.
The US Dollar (USD) is at the forefront of this edition, with it falling against most of its currency rivals due to political and economic factors that are influencing exchange rates across the globe.
USD Drops As Tensions With China Escalate
The Greenback had a poor start to the week amid escalating tensions between Beijing and Washington, with the Chinese government retaliating against the US's decision to expel its diplomats from the consulate in Houston.
Earlier, the US Secretary of State Mike Pompeo called on the international community to form a "new alliance of democracies" to oppose Beijing's "new tyranny."
The US Dollar fell to as low as 0.78 against the Great British Pound on Monday. The Euro (EUR) rose above 1.17 against the USD for the first time since September of 2018, underscoring just how much these political tensions and the coronavirus-induced economic crash are weighing on the value of the Greenback.
It's interesting to note that normally, such adverse developments in relations with China have come as good news for the US Dollar, as it is a safe haven asset.
However, it seems that Forex investors and traders are concerned that the most recent escalations could boil over and hurt the Greenback, which explains why it has depreciated in recent days.
FX traders are closely watching developments in hostilities between Washington and Beijing, as a further escalation could see the USD fall further against major and Emerging Market (EM) currencies.
The two economic superpowers have long been embroiled in a trade war, which began shortly after Donald Trump entered office, and they have both engaged in an ongoing war of words.
However, tensions between the two are now shifting their focus toward political matters, with Washington, in particular, expressing concerns over China's alleged attempts to undermine Hong Kong's sovereignty and its imprisonment of Uighur Muslims in parts of the country.
Covid-19 Continues to Wreak Economic Havoc
While many economies around the world are gradually reopening as the pandemic begins to dissipate and social distancing measures are gradually eased, many US states are still in lockdown. The country recently passed the four million mark in terms of Covid-19 cases.
Recently published US unemployment data was less than encouraging and this usually would have come as a boost to the USD, as it tends to appreciate due to a more robust demand for such safe-haven assets in times of economic difficulty.
However, this trend is slowly starting to no longer be the case, possibly because gold, another safe-haven asset, has been performing so well this year.
So, it seems investors are now favoring gold as their safe haven investment of choice over the US Dollar, leaving the Greenback exposed to adverse economic developments and global political instability, from which it previously benefited.
A Quick Summary
- The US Dollar fell to its lowest level against the Euro since September 2018 following an escalation of political tensions with China.
- It also fell against the Great British Pound, dropping to around 0.78.
- This downturn was driven by Beijing retaliating to Washington's expulsion of Chinese diplomats from the consulate in Houston, and US Secretary of State Mike Pompeo calling for unified action to end China's "new tyranny."
- Covid-19 is continuing to wreak economic havoc in the US, with many states still on lockdown and several sectors of the economy operating on life support.
- Usually, such developments would come as a boost to the Greenback, due to its status as the safe-haven investment of choice, but it seems it has lost its crown to gold, which is up over 20 percent since the start of 2020.