Today Federal Reserve Chairman Jerome Powell is continuing his testimony before Congress regarding the impact of the coronavirus pandemic on the US economy. Powell’s words are likely to have an impact on the dollar.
Speaking of the USD, it has been steadily increasing in value compared to other major currencies, in large part because it is a safe asset. Due to a worsening in the performance of fundamentals globally, as well as the second (and in some regions, the first) wave of the Covid-19 pandemic, investors are apprehensive and seeking risk-off opportunities.
Europe is a particularly vulnerable region at the moment, as cases continue to rise in countries like France, Spain, Italy, and Germany, who were already heavily affected by the first wave of the pandemic. The preliminary PMI data for September so far has been largely disappointing, prepping the ground for more ECB stimulus.
Meanwhile, as the coronavirus pandemic is proving difficult to contain in the United Kingdom, the government is weighing its options regarding the massive furlough scheme that is expiring next month.
About 9 million people are currently on furlough in the UK, with the government paying their salaries while they are staying home. But so far government officials have said the scheme will not continue after October, even if the pandemic remains a danger.
They are reportedly looking at alternative plans that might not strain the budget quite as much, but also allow companies to keep their employees. The strain on the UK economy caused by the high likelihood of a no-deal Brexit is already large enough without considering a possible sharp spike in unemployment.
Later in the day we expect oil inventory data from the United States. Oil prices have come under pressure recently and another oversupply fear can easily tip them under $40 per barrel.
