The US dollar Index Weakens Further, Gold and Euro Soars

The US dollar continues losing value against gold and major currencies amid rising concerns over economic recovery and increasing coronavirus infections.

The US dollar has lost more than 4% value in July, representing the biggest monthly drop in a decade.
The short position in the dollar has also been increasing at an immense pace over the last few months, meaning that investors are less confident in the US economic recovery.

Meanwhile, other major currencies like the euro and sterling are hitting new multi-year high against the US dollar.

“The dollar’s weakness is reflected in a stronger euro, also driven by a large position shift that sees net longs as big as they were just before EUR/USD peaked in 2018 … Seasonal patterns don’t point to EUR/USD weakness in August, and the longer-term euro trend is upwards,” said Kit Juckes, head of FX strategy at Societe Generale.

Euro, on the other hand, is currently trading at more than two years high against the US dollar. The common currency jumped close to 5% in the past month alone. Along with the dollar weaknesses, European currency gained momentum on 750bn euros stimulus package to help the member struggling countries during the testing times.

The market analysts are expecting the common currency to sustain gains against the greenback amid worries over economic growth.

On the other hand, investors are moving their money towards gold, which already surged to a record level of $2000 an ounce. The plunging US treasury yields along with the massive growth in the US debt are among the biggest factors behind the sharp price rally of the yellow metal.

Concerns over the second US stimulus plan are high as economists believe hundreds of billions of dollars of the stimulus package will further enhance fiscal deficit. Investors are now waiting for Friday’s Non-Farm Payrolls to access the US economic condition. The job growth decline could create more pressure on the USD index.