FX Daily Update – US Session 7th July 2020

Essential Insights

• The dollar index has resumed its bearish rally following concerning covid-19 data
• Melbourne, Australia has been placed under lock-down restrictions for 6-weeks due to covid-19 risks increasing in Australia
• The ECB has slashed Eurozone growth forecasts for 2020 & 2021, following a slower than expected economic recovery
• The RBA concluded its central bank event with no changes to cash interest rates 

Highlighted News

The European Commission slashed Eurozone growth forecasts as a pick up in economic activity has been far less than expected , especially on the consumer side which has shown clear signs of lag. Disappointing consumer confidence and consumer spending illustrates a concerning lack of spending confidence and this will reduce economic recovery prospects. 

FX Observations 

USD

• Higher appetite for risk assets in the market has seen the dollar index once again falling with the index slipping below the 97 level and continues to trade lower. Markets have interestingly become somewhat resilient to bad covid related news and have instead focused on pricing in  global economic recovery prospects against the rising risks of Covid-19 spreading. 

AUD

• The Australian dollar reversed sharply from the increase in risk appetite despite concerning covid-19 data which has shown an uptick in cases within Melbourne. AUD/USD pushed through an important 0.6900 level and is heading towards 0.6920. There were no noticeable statements/decisions from the RBA (as expected) , though the economic outlook for the Australian economy will be impacted by the progression of the virus in state Victoria.