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Forex Market: The dollar falls on all fronts


While investors in the Forex market focused on the prospect of an eventual economic recovery after the economic damage caused by the Coronavirus, this Monday, the US dollar falls.

Adding to this, higher-risk currencies, including the Australian dollar, skyrocket.

Here are the highlights of yesterday’s session.

The dollar falls in the Forex Market

The World Health Organization (WHO) reported last Sunday that everyone suffered a considerable increase in Coronavirus cases. Despite this, investors decided to buy higher risk currencies.

Due to this trend, the dollar falls 0.64% in the Forex Market against a basket of currencies, reaching 97.06 points.

Dollar Forex market falls 22062020
Graph of the dollar index, indicating its fall on Monday. Source: Yahoo! Finance

In addition, the euro gained 0.72% against the dollar, reaching 1.1256, rising from its recent falls of almost two and a half weeks.

Dollar Forex market falls 22062020
EUR vs. chart USD, indicating the increase in the value of the euro on Monday. Source: Yahoo! Finance

COVID-19: modifying factor of the Forex Market

Some analysts believe that strong economic data has sown hopes that the economy will recover quickly from company branch closings as a measure against the Coronavirus. One of these companies is Apple Inc, who issued a statement on Friday expressing the temporary closure of stores in Arizona, Florida, North Carolina and South Carolina. All this thanks to the new registered cases of COVID-19.

However, Joe Maninbo, senior market analyst at Western Union Business Solutions in Washington D.C, maintains an optimistic position:

The market is focused towards the second half of the year, where it expects the recovery to start in earnest (…) The conviction is very unconvincing, so sentiment may change from one moment to the next, but for now the market is seeing the glass half full

Other investors like Francesco Pesole, Forex strategist at ING Direct, notes that they were all watching to what extent the new cases led to tighter quarantine and blockades:

If the markets start to make the connection that more cases will automatically involve new locks, consequently they will become much more sensitive to any spike in terms of this second wave.

The Australian dollar increases its performance

In response to this falling dollar, higher risk currencies outperformed. The Australian dollar rose 1.21% to hit $ 0.6915 against the greenback.

Dollar Forex market falls 22062020
AUD chart vs. USD, indicating the growth of the Australian dollar against the US dollar. Source: Yahoo! Finance

Governor of the Reserve Bank of Australia (RBA) Philip Lowe encouraged buyers of the Australian dollar, seeking to build confidence. He indicated that “the recent rise in the currency is not a problem, and the impact of the pandemic will not be as bad as feared

In addition, last Friday, the leaders of the European Union agreed that urgent measures needed to be taken to pull their economies out of the deepest recession since World War II, but failed to make any progress. This has divided them for weeks.

The British Pound recovers

On the other hand, the pound sterling recovered, helped by the constant weakness of the American dollar. Another important factor influencing this increase is the hopes of a Brexit trade agreement, in order to unblock negotiations with Brussels.

The British pound rose 0.8% to $ 1.2445, having previously fallen to $ 1.2337, its lowest level since June 1. And against the euro, the pound was stable at 90.45 pence.

Dollar Forex market falls 22062020
GBP vs. chart USD, indicating the recovery of the British Pound. Source: Yahoo! Finance

Last week, French President Emmanuel Macron clarified to British Prime Minister Boris Johnson that “France continues to support the arrival of an agreement” Also, the head of the EU, Ursula von der Leyen, insisted “willingness to make every effort to reach an agreement

Britain has until the end of the year to sign this agreement with the EU, when the transition period after its departure ends. The fact that both sides are in favor implies that there may be considerable potential for progress.

Unsurprisingly, some analysts believe the pound should have risen more. Especially after the Bank of England lowered negative interest expectations in response to signs of economic recovery.

Lee Hardman, currency analyst at Mitsubishi UFJ Financial Group, elaborates this statement:

Concern about Brexit and negative interest rates have been two major factors that have fallen on the pound in recent months, so it was surprising that there was not even an upturn in relief as downside risks have diminished

Will Bitcoin be affected by the fall of the dollar in the Forex Market?

Last, but definitely not least, it should be noted that there is a worrying feeling in various people of the cryptoverse … The fear that Bitcoin will take the same path of action.

At the time of writing, the price of Bitcoin is trading stable around US $ 9,650.

Dollar Forex market falls 22062020
Bitcoin price during the day Monday. Source: CoinMarketCap

We all know that the United States stock market has suffered extreme volatility thanks to a wide range of factors. One of them is the uncertainty surrounding the Coronavirus pandemic and the emergence of new cases of contagion. In addition to the complicated sociopolitical conditions in the United States.

Based on the stock market crash, that trend in stocks may have an impact on Bitcoin in some way. This decline is said to threaten the cryptocurrency’s uptrend, but it is not yet known exactly whether it will follow the path of the stock market.

And you, do you think the dollar will continue its fall? Will Bitcoin really be affected by this? Let us know your opinion in the comment box.

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