Dollar Stays Weak After EU Leaders Agree On Recovery Fund

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The U.S. dollar exhibited weakness against its peers on Tuesday after risk sentiment in the market improved as the European Union leaders agreed on a stimulus package, and hopes about coronavirus vaccines rose.

The dollar index, which slipped to 95.05, staged a recovery of sorts subsequently, but was still trailed its previous close by about 0.65% at $95.21 in late afternoon trades.

Against the Euro, the dollar was down almost 0.7% at $1.1524 as EU leaders EU leaders conceded the package worth EUR 750 billion, after engaging in marathon talks over the past four days in Brussels.

As per the deal, the bloc will issue debt jointly which would be provided to member nations hit hardest by the Covid-19. Out of the EUR 750 billion recovery plan, EUR 390 billion will be in the form of grants and EUR 360 billion of low interest rate loans. Now the deal needs to be approved by the parliament of 27 member states.

The Pound Sterling was stronger by about 0.5% with a unit of sterling fetching $1.2726. Data from the Office for National Statistics showed that the UK budget deficit increased sharply in June.

Public sector net borrowing excluding public sector banks increased GBP 28.3 billion to GBP 35.5 billion, which was the third highest deficit in any month on records.

The Japanese Yen strengthened to 106.80 a dollar, firming up from Monday’s close of 107.27 a dollar. In economic news from Japan, data from the Ministry of Internal Affairs and Communications showed that Japan inflation rose 0.1% on year in June – in line with expectations and unchanged from the May reading.

Core CPI, which excludes volatile food prices, was unchanged on an annual basis – versus forecasts for a drop of 0.1% following the 0.2% decline in the previous month.

Against the Aussie, the dollar shed as much as 1.6% at $0.7127.

The Swiss franc firmed up 0.6% to 0.9332 a dollar, while the Loonie strengthened to C$1.3460, gaining 0.55% from previous close.

Data from the Federal Customs Administration showed Swiss exports declined sharply in the second quarter, falling by a real 12.5%, compared to a 2% decrease in the first quarter. Imports decreased 12.1% in the second quarter, following a 4% decline in the previous quarter.

In nominal terms, exports fell 11.5% quarterly and imports declined 16% in the second quarter.

The trade balance registered a record surplus of CHF 9.595 billion in the second quarter versus CHF 8.440 billion in the previous quarter. In the second quarter 2019, the trade surplus was CHF 6.152 billion.

Data from Statistics Canada showed retail sales in Canada jumped 18.7% over a month earlier in May 2020, rebounding from a downwardly revised 25% slump in the previous month. It was the largest rise in retail trade since series began, as several businesses resumed operations following coronavirus lockdown restrictions.

Year-on-year, retail Sales decreased 18.4% in May of 2020 over the same month in the previous year.


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