Greenback in market’s focus as USDX sits around 92.61

Chris Lee

The greenback continued to remain in the forex spotlight on Wednesday afternoon as the US Congress deliberated further on a stimulus package for the flagging economy.

No deal has yet been struck by the legislature, where lawmakers have split along largely partisan lines.

The US dollar index, which monitors the performance of the currency in conjunction with several others from around the world, was spotted at 92.61 at one stage over the day.

On Wednesday afternoon, it was revealed that jobs growth in the all-important US services sector had gone down even compared to last month.

According to figures from the Institute for Supply Management, the employment index in non-manufacturing sectors went down to 42.1 over the course of July.

This reflected a dip from its previous position of 43.1 in June, and suggests that the US economy is far from recovered from the pandemic at the moment.

One possible effect of this news for the dollar is that it gets dragged further down in the coming days due to fears over the health of the economy.

Another is that it could spur lawmakers in Congress into action – a development that, if it materialises, could turn the dollar’s fortunes around.

The currency action was also taking place against a backdrop of problems for US bond yields.

The value of these have gone down in recent weeks alongside the decline in the value of the dollar.

The dollar’s dip came after a period of strength for the currency during the earlier stages of the pandemic – it was in demand for a while due to its high liquidity.

Those days, however, appear to be over – for now.

Elsewhere around the world, the British pound was up by 0.1% against the single European currency.

It was noted at 90.22 pence in this pair at one stage.

The euro, which has often emerged victorious in the forex markets in the last fortnight, also now has some challenges ahead.

On Friday of this week, for example, a significant insight into the state of the French labour market is due to be published.

The country’s preliminary nonfarm payrolls for Q2 2020 are due to come out at 6:45am GMT.

On a quarter-on-quarter basis, these are expected to go from -2% to -2.2%.

Later in the day on Friday, there will be a global trade balance figure from Italy as well as one focusing specifically on Italy’s trade balance with the EU.

The nature of the relationship between Italy and the wider EU has been subject to some scrutiny recently, meaning that euro traders may watch this release.

However, with the recent Europe-wide stimulus package being interpreted as a sign of closer fiscal union between states such as Italy and the wealthier northern states, some traders may want to keep a close eye on the relationship between the two.

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