Dollar Pushed Cautiously Higher – 28 July 2020

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The deadline for an extension of unemployment benefits is Friday. A boost in gold demand, as a result of the overall uncertainty, helped to support the greenback as well as other major currencies that are related to risk sentiment, primarily the Aussie and Kiwi Dollars.

The US Dollar recovered from a recently struck 2-year trough ahead of an upcoming policy meeting of the US Federal Reserve. Also in the US, the federal government is still trying to work out their differences for the next fiscal rescue package, intended to help provide some relief from those financially impacted by the Covid-19 pandemic that continues to ravage the US. The deadline for an extension of unemployment benefits is Friday. A boost in gold demand, as a result of the overall uncertainty, helped to support the greenback as well as other major currencies that are related to risk sentiment, primarily the Aussie and Kiwi Dollars.

As of 10:25 am in London, the EUR/USD was trading lower at $1.172, a loss of 0.2298%; the pair has ranged from a trough of $1.16984 to a peak of $1.17742. The AUD/USD was trading lower at $0.7142, down 0.0588%, while the NZD/USD was at $0.6641, down 0.4123%. The USD/JPY was lower at 105.3310 Yen, down 0.02%.

While analysts don’t expect any major surprises from the Fed when they announce the outcome of their policy meeting on Wednesday, analysts are looking to see if forward guidance will be shifted. There are expectations that the Fed might look to amend their inflation target, currently at 2%, and use an averaging technique instead. Otherwise, most economists don’t foresee any major policy changes at this time; given the economic circumstances, the ultra-loose policy is likely to continue for the long term. As regards the relief package, more efforts on both sides of the aisle will be needed to reach a compromise between the Democratic party’s push for a $3 trillion aid package and the Republican’s more meager $1 trillion package.

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