​What the Impact of New Record of US Covid-19 Cases on Forex Market?

The stocks consolidated, on June 25th, that the negative securities on the Covid-19 are overshadowed by the links that the US regulators will ease the Volcker Rule and allow the banks to increase their investments in the venture capital funds and free up capital. Risk aversion is in full swing on forex, as the currencies extended their fall after that the US reported the largest increase in the Covid-19 cases ever.

Despite the Trump administration‘s attempt which minimized the risk of a second wave, these numbers have told a very different story. The new cases of virus in the 3 most populous states in the US have peaked in the 4th week of June and, although the number of deaths remains low, it’s still too early to take stock. Even if the politicians try to deny it, the curve is rapidly developing in the wrong direction. The president and the governors who predicated the re-opening dont want to reverse the process, but the Americans themselves can choose to strengthen their own quarantine measures. The reservations of restaurants in California, Texas, Georgia and Florida have plunged in the wake of recent news, and we expect that other activities will follow up.

The US isnt the only country to indicate an increase in the number of cases (although their trend is among the worst). Australia has noted the largest increase in one day within two months, which has led to a rapid deployment of mobile screening centres. That said, they have only noted an increase of 33 cases, up from 37,000 cases in the US on June 24th. So while White House advisor Larry Kudlow declared that he still sees a V-shaped recovery, while the investors should be more careful. The data for April and May will be good, but the improvements will start to fade in June. The durable goods orders have risen more than expected last month, but the trade deficit and the demands for unemployment benefits have been worse than expected.

However, the greenback found itself in a safe haven which allowed it to extend its gains against the euro (EUR/USD), the Japanese yen and the Swiss franc. The resistance of USD/JPY has left more than a perplexed situation with it. Treasury yields have plummeted and the most alarming increase in the number of virus cases is in the US. Still, the investors are snatching up the US dollars because Mr. Trump might discover that the only way to reinvigorate his supporters is to criticize other countries and do some publicity stunt for the protectionism by threatening new tariffs.

We are already starting to find this with targeted warnings on Canada, the EU and the UK. The personal income and spending reports of the June 26th may not provide much guide, as the sharp drop in income indicates a drop in income while the sharp increase in retail supports personal spending. In the end, we dont think that USD/JPY could withstand broader risk aversion forces and that it will soon return below 107.

EUR/USD has dropped more than GBP/USD despite a further improvement of Germany Gfk Consumer Sentiment Indicator and a weaker-than-expected improvement of the UK CBI retail sales report.

In addition to the tariff threat from the USA to the EU, on June 25th, the ECBs transcript also suggested that there is no way out of quantitative easing within sight in the near future. The policymakers are seeing a weakening of the price pressure, downside risks to growth and a weak demand. Therefore, “all the scenarios could prove to be too optimistic for the last part of the projection horizon.” Mr. Mersch, ECB member, seems to echo this sentiment when he says that the recovery is rounded by an exceptional uncertainty.

(Source:https://fr.investing.com/analysis/nouveau-record-du-nombre-de-cas-de-covid19-aux-usa-quel-impact-sur-le-forex--200434088)