July 23 (Reuters) – The dollar index cracked March’s 94.63 pandemic low, hitting its lowest level since September 2018, after a short-lived bounce following U.S. jobless claims data . Indeed, that bounce was soon overwhelmed by growing U.S.-centric concerns regarding raging coronavirus cases , the timeliness and heft of the next U.S. pandemic relief bill , and deteriorating U.S.-China relations .
EUR/USD snapped back from its early dip to 1.1504 and the top of the upper 30-day Bolli it’s traded above for a second consecutive session, extending its breakout past the prior pandemic peak at 1.1495 to its best levels since November 2018.
The net takeaway from the U.S. jobless claims data is the recovery will be in grave danger if Congress can’t avert the pending plunge in relief support. With a catastrophically high 31.8 mln people still receiving unemployment checks in the first week of July, and new claims climbing 109k to 1.416 last week, the seemingly good news about lagging continuing claims dropping 1.107 mln to 16.197 mln may also represent an increasing number of people whose eligibility has run out.
Bottom line is that without a sharp turnaround in the deteriorating pandemic data in the U.S., economic recovery will be difficult, drawn out and dependent of further fiscal and monetary support that doesn’t bode well for the dollar.
And after this week’s EU summit success, which offers a brighter longer-term outlook for the region, U.S. political uncertainty is rising ahead of November’s elections.
Adding a bit more uncertainty is intraday weakness in stocks, following a warning from the SEC head about excessive, short-term, retail speculation aiming to get rich quick rather than using sound, long-term investment principles. This as longs take stock, so to speak, of their holdings as pre-pandemic levels come back into play.
USD/JPY gave back yesterday’s gains as the haven yen was favored over the dollar and its growing list of demerits. But prices need a weekly close below 106.70 props to re-engage the broader bear market and potentially put the 101.18 pandemic low back in play.
Sterling recovered early losses despite EU-UK trade deal comments that were uninspiring, mostly just riding the coattails of the broader dollar drop in late London trading. Overall not much net change, stuck below Tuesday’s 1.2768 July high, that’s just shy of June’s 1.2812 recovery high.
The overbought aussie ran into some profit-taking against the dollar, but more so against the haven yen, after the latter’s Wednesday high was a failed breakout above June’s high, which was a failed breakout above December’s high. The lockdown in Victoria and very un-Australia-like GDP and deficit projections crossed with healthy July PMI rebounds above 50. The main driver of aussie’s strength off pandemic lows, though, has been global risk acceptance, the embodiment of which is the S&P 500, now a little wobbly.
High-beta and emerging-markets currencies were generally softer with stocks, and robust demand for havens.
Oil struggled due to a cloudier U.S. recovery outlook, while gold got closer its 2011 record high at 1,920.
Friday’s data features Markit July PMIs from Europe and the U.S., with Germany being the lone European country not expected to clear the breakeven 50 hurdle.
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(Editing by Terence Gabriel Randolph Donney is a Reuters market analyst. The views expressed are his own.)
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