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Forex News Roundup For July 5th, 2020

Forex News Roundup: US Dollar Reacts To Employment Data, Remains Flat Against CAD

Currency Converter Calculator's Forex News Roundup aims to keep Forex enthusiasts and traders abreast of the latest developments in the international currency exchange market, so you can spot opportunities or simply stay up to date.

Investors, politicians and business leaders were keeping a close eye on the release of US non-farm payrolls data, as they looked to gauge how quickly the economy is recovering as lockdown measures have been eased in many States.

This dominated headlines in the Forex press, but there are also a few other ongoing and important developments to watch out for.

USD Falls On Better Than Expected Employment Data

The US Dollar fell marginally against a slew of major and minor currencies following the release of better than expected US employment data. Specifically, 4.8 million Americans entered employment in the month of June, considerably higher than the average analyst expectation of around 3 million. This brought the national unemployment rate down to 11 percent.

The Greenback took a hit in response to this as it is considered a safe-haven asset, alongside gold. So, with the economic outlook seemingly improving, demand for this low risk, low return asset fell, while the appetite for riskier and potentially more lucrative investments, such as equities and Emerging Market (EM) currencies, increased.

We have seen this correlation between positive or negative economic news and the US Dollar over the course of the pandemic – and even decades before it, as the USD has long been viewed as a safe-haven currency, even by the standards of other hard currencies, such as the Euro (EUR) and the Great British Pound (GBP).

However, the US Dollar only fell by a relatively small amount in response to the data, as it showed that some 20 million Americans are still on unemployment insurance. The bulk of them were employed until the pandemic struck and crippled large segments of the economy.

CAD Remains Flat Against US Dollar

The Canadian Dollar (CAD) has remained relatively flat against the Greenback, with the USD currently trading at 1.36 against the CAD. This is considerably up on the low 1.30s average we saw throughout the second half of 2019, but it is still some way off the highs of 1.45 was saw in March as coronavirus cases surged in Europe and the US.

FX analysts have suggested that where the exchange rate goes from here will principally depend on how quickly the global economy recovers from the pandemic, and, in particular, how quickly the US and Canadian economies are revived and get out of recession.

A Quick Summary

  • The release of US non-farm employment data for June has been the focal point for currency traders and businesses, as it provides an indication of how quickly the US economy is recovering and has a bearing on various currency pairs.
  • The figures were better than expected – with 4.8 million Americans returning to work throughout June compared to analysts' the expectation of just 3 million.
  • This resulted in the USD falling against a range of currencies, as, with the economy doing better than anticipated, a low return safe haven is less attractive. But, it only fell slightly against most currencies, as the US still has an unemployment rate of about 11 percent, so the crisis is far from over.
  • Aside from this, another important story is the ongoing battle between the Canadian Dollar and the Greenback.
  • The CAD/USD exchange rate has been relatively flat in recent days, but volatility is anticipated for the coming weeks and months, especially in light of the sharp fluctuations we've seen in the exchange rate over the past 9 or so months.