By Peter Nurse
Investing.com – The Dollar pushed European trade higher in early trading Friday, helped by its safe-haven status, as coronavirus cases continue to rise in the U.S. and unemployment data indicates a slow recovery in the labor market.
At 3:15 a.m. (715 GMT), the U.S. dollar, which tracks the greenback against a basket of six other currencies, rose 0.3% to 96.915, fell 0.2% to 1.2580 and 0.3% to 106.84. The U.S. dollar was at the forefront of the U.S. economy at 3:15 a.m. (715 GMT)
The number of coronavirus cases in the United States, the world’s economic powerhouse, continues to grow, with more than 60,000 new Covid-19 infections reported on Thursday.
With heavily populated states such as California, Florida and Texas recently breaking records and needing to resume some social distancing measures, hopes for an aggressive economic recovery are fading.
The number of Americans claiming unemployment benefits fell more than expected last week, according to Thursday’s data, but the figure remained above 1 million for the 16th week in a row. Continuing claims also remained above 18 million, suggesting that the labor market would take years to recover from the pandemic.
However, while the Dollar appreciated against the EUR on Friday – it fell 0.2% to 1.1263 – it remains slightly weaker against the single currency since the beginning of the year. And further losses seem likely.
“The recent virus problems in the U.S. pose a significant risk to the U.S. recovery in the coming months, as the recovery in the Euro-Zone services sector is expected to continue unless a second wave of viruses occurs during the European holiday period,” said analysts at Danske Bank in a research note.
Danske Bank expects the EUR/USD to reach 1.15 over a period of three months.
In May, French industrial production rose sharply (19.6%), thanks to fewer plant closures and the reopening of factories, reinforcing the sense of recovery in Europe.
Attention will now turn to next week’s meeting of EU leaders to see if an agreement can be reached to distribute the proposed €750 billion stimulus fund to the economies hardest hit by Covid-19 in the region, although it is also worth looking at Fitch’s credit rating for Italy.
“The question is whether Fitch decides to be tough and downgrade Italy. We believe it will remain on hold as the ECB and the EU show strong support for Italy through the EQ and the expected stimulus fund,” said Danske Bank.
Elsewhere, risk related currencies gave up their gains from the previous day, as the pair fell 0.5% to 0.6932 and the pair fell 0.12% to 0.6555, while the pair gained 0.3% to 7.0115.
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