Forex News Roundup For May 28, 2020
All Eyes On US Dollar As China Tensions Grow, EU Mulls Covid-19 Fund
Currency Converter Calculator's Forex News Roundup aims to keep you abreast of all the latest developments in the global currency market. In this edition, the US Dollar (USD) is at the forefront of all of our key stories, as several political and economic developments look set to impact its value and keep it in the headlines for some time.
US Dollar Holds Firm Despite China Tensions
The US Dollar has held firm in recent days as its price begins to settle down after a particularly turbulent period, despite political and trade tensions between Beijing and Washington persisting. The two economic superpowers first locked horns in 2018, with President Donald Trump threatening and eventually imposing tariffs on some Chinese imports into the US.
Political tensions escalated when US Secretary of State Mike Pompeo this week accused Beijing of trying to undermine Hong Kong's autonomy and sovereignty, triggering a war of words between American and Chinese officials.
Following this, the Chinese Yuan fell to a record low of about 7.20 per USD, though it slightly recovered in the subsequent hours.
The Australian and New Zealand Dollars have also been impacted by the US-Sino trade war, with the two currencies falling from their almost 10-week highs on Thursday.
EU Covid-19 Recovery Fund to Test EUR/USD
On Wednesday, the European Commission put forward plans for a large fund to help the bloc recover from the coronavirus pandemic. The proposal is still a long way away from being approved, as it will need to be negotiated and approved, but FX analysts have suggested that the creation of an EU Covid-19 recovery fund could weaken the US Dollar in its battle against the Euro.
The USD is particularly vulnerable now, with the US having more Covid-19 cases than any other country by a large margin and its economy also being hit particularly badly, especially with regards to unemployment.
And while some European countries have also been hit hard by the pandemic, most are far ahead of the US in terms of their "virus curve" and recovery, though it remains to be seen how each member state decides to manage the process of reopening and reviving their economy as we transition into the "new normal," as politicians have described it.
USD/ZAR Battle Could Go Either Way
The US Dollar has been fluctuating quite sharply against the South African Rand in recent weeks, largely because of the coronavirus-induced economic shocks that are being felt across the United States.
Analysts are unclear where the exchange rate will go next but have warned that the risk of another rally or decline remains high as the situation is still volatile.
Quick Forex News Summary
- The USD has held its ground despite an escalation of political tensions with China after Washington accused Beijing of trying to undermine Hong Kong's sovereignty, but the greenback remains vulnerable to another wave of drops against other currencies.
- FX analysts have noted that the EU's plans to launch a coronavirus recovery fund could cause the USD to depreciate against the Euro, particularly as many European economies are ahead of the US and are beginning to ease lockdown measures and are thinking about ways to revive their economy.
- The US's situation remains bleak, with large parts of its economy still paralyzed by the lockdown and unemployment continuing to increase.
- Lastly, the battle between the USD and the South African Rand has somewhat settled after weeks of price movement. However, analysts believe another round could be on the horizon as the situation remains volatile.