The US Dollar has long been considered the strongest currency in the world, and the Forex Market is proof of that. The US Dollar is by far the most frequently traded currency, as 88% of all Forex trades in 2019 included USD. In fact, the USD makes up one-half of all the major currency pairs, with the top four being EUR/USD, USD/JPY, GBP/USD, and USD/CHF.
But where does the dollar stand in 2020? The Coronavirus pandemic came as a blow to all global markets in March, affecting prices of everything from Cryptocurrencies to the Stock Market. The Dollar, however, spiked when the pandemic hit, as many people wanted Dollars when risk of infection began to rise, driving the USD price upwards. Since then, the Dollar has experienced much volatility due to numerous factors, such as growing tensions between the US and China, spikes in unemployment and fears of a second wave of Coronavirus.
After months of downward movement, the Dollar fell to a two-year low on Wednesday 29th July. Just a few days later, the Dollar managed to maintain gains to reach a one-week high against the Euro. Market sentiment is mixed, but there are a few events to look out for that will undoubtedly impact the Dollar.
Coronavirus: are cases falling or is the US in its second wave?
It was reported that the weekly US Coronavirus cases rose by less than 50,000 on Monday, signifying a possible downturn in infection rates. While this could be the result of a “weekend effect” – ie. a lag on reported cases and deaths over the weekend – a decrease in cases would potentially allow for the economy and employment rates to pick up.
Unemployment Benefits and Coronavirus Aid Talks
The unemployment benefits for Americans who lost their jobs due to the Coronavirus expired before the Whitehouse was able to announce a new Coronavirus Aid package. The US Republicans and Democrats failed to reach a consensus to extend or replace the $600 weekly unemployment benefits. Instead, the figure has been cut to $400 with the expectations that individual states pay $100 of that amount. Traders can expect more announcements related to financial aid in the US, all of which can have a large impact on the Dollar’s strength.
UK Job Losses and European Covid-19 Cases
Major Currency pairs have also been largely affected by news coming from Europe and the UK, with Job Losses and Retail Sales figures causing fluctuations in exchange rates. UK Jobless Claims jumped by 94,400 in July alone, while the latest retail figures indicate a slow return to normality. Rising concerns over a second wave of Coronavirus is causing uncertainty in Europe, which may also impact the EUR/USD pair. Elsewhere, the BTC/USD pair showed Bitcoin reaching $12,000 twice over the past two weeks, driving Cryptocurrencies upwards.
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