Dollar drops sharply in hopes of financial aid plan

  •   08/04/2020 - 14h55
  •   HARMANT Adeline

The U.S. dollar fell sharply against other currencies in yesterday's trading session, particularly against the euro, after gaining points for nearly six days. For its part, and despite the British Prime Minister's deteriorating health, the pound sterling seems to be holding up well. Let's take a closer look at the current state of the major Forex currencies.

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Dollar drops sharply in hopes of financial aid plan
Image copyright: killerturnip - Flickr

Update on the main currencies in the foreign exchange market :

At the end of yesterday's session, we could indeed note a strong rebound of the euro against the dollar with a 1.04% gain and a rate of 1.0905 pips for the EUR/USD.

Let's remember that this news is surprising at first glance given that the greenback has been playing the role of a safe haven for some time now and as is often the case in a crisis. As market sentiment improves, some of these gains are thus tending to erode gradually. Indeed, we can see that investors are increasingly hoping that the peak of the coronavirus epidemic in Europe is about to be passed and this is reflected in their positions, especially in the Forex market.


Why is the dollar currently moving lower?

The improvement in market expectations is not the only reason for the current weakness of the US dollar. Indeed, the US currency also seems to be suffering from the anticipation of a massive additional support plan of $1.5 trillion as requested by the US government.

The figures for the US economy are also at half mast with an expected 30% recession in the second quarter of 2020 and an unemployment rate close to 13%.


Will the situation continue with regard to the EUR/USD?

Nothing is less certain since the decline of the pandemic is not yet confirmed in Europe and the number of deaths is even on the rise in some countries including France. The euro's respite is therefore not expected to last very long.

Indeed, unless the euro area manages to meet the challenges it faces from a budgetary point of view or if it manages to repatriate its stock ofnet foreign assets, the depreciation and recession is likely to continue for some time and the euro is therefore likely to lose ground in the coming weeks.


Update on the Pound Sterling with the deterioration of Boris Johnson's condition :

The Forex market doesn't really seem to take into account, for the moment, the worsening health of the British Prime Minister with a good maintenance of the Pound Sterling.

However, if this leader's condition worsens, it could lead to a constitutional dilemma in the absence of a number 2 to take over.

For the time being, the Pound is managing to gain 0.94% against the dollar and is down 0.10% against the euro.