The Dollar strengthened due to the concern of 2nd wave of COVID outbreak

The dollar strengthened last week thanks to rising safe-haven demand amid the bleak US economic outlook caused by the corona virus. In its meeting last week the Fed said it would support the US economy with a variety of policy tools. The Fed also expects the US economy to contract 6.5% this year, with the unemployment rate at 9.3%. Safe haven is also sticking out due to fears of the spread of the second wave of corona virus. The number of infected in the US has again increased after 5 weeks of decline. Meanwhile, the dollar reacted less to the release of consumer sentiment data released last Friday, which showed a stronger than expected number. The dollar index rose 0.4% last week, after falling for the third week in a row.

The pound fell below the level of 1.2500 last week on the dollar after data showing the UK economy contracted to the lowest level of 20.4% in April due to the lockdown policy implemented by the UK. Market participants see this figure as an early sign for the decline of the UK economy before the recovery process which takes a long and long time.

Gold prices weakened last Friday, but still recorded a gain of 3%. Last Friday, gold prices were pressured by a rebound in stocks, a strengthening dollar and rising US government bond yields. However, concerns about the second wave corona virus and its impact on the economy still support sentiment. Last Thursday, gold gained around 1.1% after the Dow Jones index plummeted 7% due to the increasing number of virus infections in the US, as well as the gloomy outlook for the US economy from the Fed.

After strengthening for six consecutive weeks, oil prices finally dropped last week. Market sentiment worsened after the Fed warned that the economic damage caused by the Covid-19 pandemic would last long. In addition, the market is also worried that a second wave of the corona virus will interfere with demand recovery. Meanwhile, some analysts see the recovery in oil prices as highly dependent on consumption. Barclay Plc estimates the market has seen a rapid increase in demand and supply has fallen sharply. While the CEO of Mercuria Energy Group Ltd said that global crude oil demand will return to around 95 million bpd in December, unless there is a second wave of corona virus infection. Last week, oil prices were also pressured after a cash flow out of WisdomTree's ETF of $ 128 million. Over the past week, WTI-type oil fell around 8.3%, while Brent dropped 8.4%.

Asian stocks fell this morning in tandem with a drop in world oil prices due to concerns about a second wave of the spread of the corona virus in China, prompting investors to flee to safe haven. Risk sentiment was hit again after the Beijing report noted many new cases of Covid-19 infection in recent days. The MSCI index outside Japan fell 0.25%.

There are three central banks that will hold a meeting, namely the BoJ, SNB and BoE. The two central banks are estimated to still maintain interest rate policies. However, what's interesting is the BoE, which is expected to increase the asset purchase program to 745 billion pounds from the previous 645 billion pounds. The event that was no less interesting was the speech of Fed chairman Jerome Powell.

[About The Author]

Fanny has started her self-learning of Forex since 2005 and has joined an Indonesian broker as a financial consultant in 2009. Through “trial and error”, she has learnt a lot from failure experiences. She is now a renowned trainers for the forex beginners and has helped the clients to get the profits from trade.

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