US Dollar Surges As Broader Financial Market Slides on COVID-19 Woes

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The US dollar is surging against most of its major currency rivals on Thursday as the broader financial market slides. The greenback had started the trading session lower, but it has since pared those losses and is now looking to test the key 97.00 threshold. With the coronavirus outbreak not subsiding, and some health experts recommending certain areas with a resurgence shut down again, could this trigger another huge rally in the buck?

The leading stock indexes are deep in the red on Thursday on concerns over the resurgence of COVID-19. The US keeps reporting tens of thousands of new infections across the country each day, with most of the cases occurring in California, Florida, Texas, the northeast, and Illinois. And there are no signs that things are slowing down as infections have ballooned 20% over the last week.

The trends are creating a lot of uncertainty on the New York Stock Exchange. The fears were heightened after White House health advisor Dr. Anthony recommended states with rapidly expanding coronavirus cases to consider going into lockdown again. He told The Wall Street Journal:

“What we are seeing is exponential growth. It went from an average of about 20,000 to 40,000 and 50,000. That’s doubling. If you continue doubling, two times 50 is 100. Any state that is having a serious problem, that state should seriously look at shutting down. It’s not for me to say because each state is different.”

If many states go into lockdown, could the stock market tank again? With economies beginning to reopen and the marketplace returning to some semblance of normalcy, a second shutdown could paralyze many jurisdictions and small- to medium-sized businesses. These concerns could be the driver of the slump in equities and the jump in the US dollar.

How the Coronavirus Impacted the Forex MarketIn total, the US has 3.11 million coronavirus cases, with a death toll of 134,000. On Wednesday, it recorded more than 62,000 new cases.

Meanwhile, on the data front, the labor market continued to show improvement. Initial jobless claims came in 1.314 million in the week ending July 3, beating the median estimate of 1.375 million. This is down from the previous week’s number of Americans filing for first-time unemployment benefits of 1.413 million.

Wholesale inventories fell 1.2% in May, while mortgage applications rose 2.2% in the week ending July 4.

The US Dollar Index, which measures the greenback against a basket of currencies, advanced 0.36% to 96.77, from an opening of 96.45. The index has wiped out most of its gains this year due to growing confidence in financial markets, lowering its year-to-date jump to 0.4%.

The USD/CAD currency pair climbed 0.46% to 1.3576, from an opening of 1.3515, at 17:12 GMT on Thursday. The EUR/USD dropped 0.34% to 1.1292, from an opening of 1.1332.

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