Daily Outlook

Dollar caught a little support from Fed

The dollar index bounced about 0.4% from a two-year low and the Australian dollar retreated about 0.7% from a 15-month top touched on Wednesday. The yen dipped 0.3% to 105.24 per dollar, but edged higher on other majors as the mood stayed pretty cautious and focus turned to forthcoming U.S. and European data and a U.S. fiscal rescue package which is bogged down in Congress.

The dollar caught a little support on Thursday after the Federal Reserve offered no real clues about its next moves, beyond an expected pledge to keep policy easy as a fresh surge in coronavirus infections stalls the U.S. economic recovery. That was a letdown to some dollar bears who had speculated the Fed might loosen its approach to inflation, something they now think could happen at its next meeting in September.

Fed Chair Jerome Powell called out recent weakness in high-frequency employment data as evidence that a new wave of coronavirus cases was weighing on recovery and indicated more fiscal support would help when asked what more could be done. That has investors nervously eying Congress’ impasse and likely to be looking even closer at the latest weekly jobless numbers due at 1230 GMT.

Advance quarterly GDP data due at the same time will likely be one for the record books, with economists anticipating a 34% drop in annualised economic output last quarter.

The euro EUR slipped 0.3% to $1.1745 on Thursday, but it has gained 4.7% against the dollar in July, which has it within range of posting its best month in a decade.

Dollar stops digging as investors turn to Congress for stimulus, Reuters, Jul 30

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