USD Moves Explained and Where is it Going Now?

The USD has been through a ride of movements between March up until now, being influenced by some strong fundamental factors in this volatile time.

As a recap, back in March at the early part of the month, market players scrambled for the greenback. It was largely down to all of the panics and also the action being taken globally by governments to lockdown their respective countries.

Economic contraction was inevitable given the noted measures, which forced people to seek safety. In the FX market, this was sought heavily in the dollar, given it is the most liquid and the reserve currency of the world. Flows were also observed in other havens in FX such as; JPY and CHF.

Then late March, the FOMC began slashing rates, pumping much stimulus aggressively into the economy. Flooding the market with Dollars, in turn diluting the currency, forcing it to lose ground across the board.

A period of ranging was observed from April through until the end of May. The last week of May, a wave of risk appetite came into play, heavy buying of the riskier currencies; AUD, NZD, CAD, GBP and EUR, all beneficiaries with the USD falling. It was attributed fundamentally to the big decrease in Covid-19 cases across Europe and the lack of evidence at the time of a second wave, despite economic reopenings.

In the latest week, the USD is attempting to stage a rebound, after weeks of selling, as it retreats back towards the March pre-bull run area. Markets are fearing the second wave of Coronavirus in the U.S. given rising cases and World Health Organisation warning. FOMC assurances with QE action may start to have a positive impact on the USD. Markets could start scrambling for the most liquid currency again for safety.



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