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Author: Alan LittleDate: 2020-08-19

USD weakens by 0.3% ahead of Federal Reserve minutes release

The US Federal Reserve releases its minutes today and investors are waiting anxiously to see if they reveal any indications of its future monetary policy as the dollar continues to weaken against other currencies worldwide.

With Republicans and Democrats at odds over the development of a financial support plan to aid the country’s manufacturing sector, which has been hit hard by the COVID-19 pandemic, it is unclear how long it will take for a deal to be struck, creating increasing concern among investors.

Notably, the Dollar Index was down by 0.3% (92.547) on Monday 17th August, when tracked against six major currencies.

With US Treasury yields also low and indicators that the country’s economy has been more severely affected by the pandemic than those of other leading nations, the dollar is struggling despite its traditional status as a secure currency in uncertain times.

By contrast, gold has remained strong, cryptocurrencies are booming, and the pound sterling is bearing up better than expected following indications that there may be a Brexit deal after all.

It has now been gaining against the dollar for four days.

The weak dollar has not dampened US equity markets, which are performing remarkably well in light of the country’s wider economic problems.

In particular, retailers with a strong focus on ecommerce have seen their stocks growing well.

Walmart sales are up considerably this quarter, with its share price closing at $134.71 on the NYSE yesterday.

Amazon, meanwhile, has grown steadily yet substantially over the past four months and closed at $3,312.49, and Costco has recovered to pre-pandemic levels, at $340.75 – a boon for those customers who only held onto their stock because of its dividends.

Uncertainty about the dollar seems to be benefiting the euro, which is trading strongly against it and may increasingly be seen as an alternative safe-haven currency in an uncertain world.

Overall, the dollar is now at its lowest since January 2018.

USDGBP Forex Chart
USDGBP Forex Chart

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