Monday started off very calm, with significant market action only taking off during the New York session as equities rallied. Of course, the dollar surrendered to the risk-on market mood.
EURUSD moved undecidedly ending the day around the same 1.1300 level it started at. GBPUSD traded as low as 1.2667, but recovered to the 1.2730 region at the end of the day, reaching fresh three months high. USDJPY lost 100 pips, offloading most gains from the previous week.
The Australian and Canadian dollars reached fresh multi-week highs against the United States dollar. Gold took advantage of the weak dollar and recovered to close around 1700.
The S&P 500 added 38 points, or 1.16%, to finish at 3,230.88 and the Dow Jones Industrial Average put on 461 points, or 1.62%, to end around 27,549.65. The Nasdaq Composite added 21 points, or 1.07%, to finish near 9,918.61, setting another record close.
On Tuesday, caution was the order of the markets as investors awaited the US Federal Reserve decisions. EURUSD ended near its multi-month high at 1.1384 and GBPUSD see-sawed between gains and losses but closed around Monday’s closing region of 1.2730.
USDJPY was bearish ending around 107.61. Gold edged higher. Crude oil prices moved undecidedly between gains and losses and ended the day little changed from Monday’s close with WTI a little under $39.00 a barrel.
The NASDAQ printed another record and gained 0.3% to end around 9,954. The S&P 500 lost 0.8% to end around 3,207. Dow Jones Industrial Average fell back 300 points, or 1.1%.
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On Wednesday, the dollar ended the day weaker and lower against major rivals as the FED reports finally came in. The FED sees the US GDP falling to 6.5% this year, but rising 5.0% in the next. Also it plans to keep interest rates unchanged at 0% – 0.25% till 2022.
EURUSD rallied to 1.1422 and settled around 1.1390, while GBPUSD rallied to flirt with 1.2812 but eased to 1.2750 at the close. USDJPY settled a few pips above 107.00. Gold soared ending the day around $1,736.00 a troy ounce.
The Dow Jones Industrial Average ended the day down by 282 points, or 1%, to around 26,990, while the S&P 500 index finished 0.5% lower at about 3,190. Meanwhile, the Nasdaq Composite Index added 0.7% to close around 10,020, the indexes first close above 10,000 in history.
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The ripple effect of the Federal Reserve’s conservative view on US economic recovery actually came in full force on Thursday. Panic was the order of the day. It was one of the worst days in Wall Street for this year. The dollar edged higher against major rivals.
GBPUSD eased to 1.2580 on the back of critical UK growth data and Brexit pressures. EURUSD lost the 1.1300 figure towards the close, giving up to the risk-off mood. New Zealand, Canadian and Australian dollars, the commodity currencies, were the worst hit by the sell-off.
Crude oil prices fell 6% amid decreasing hopes for economic recovery. The fall was also fueled by private data from the American Petroleum Institute which showed a large build-up in US oil inventory for the week ending June 5, renewing fears of oversupply.
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Gold teased fresh weekly highs hitting $1744.70 a troy ounce, but later surrendered to end in the bear region around $1,730.
S&P 500 lost 188.04 points, or 5.9%, to end at 3,002.10. The energy sector SP500.10 plummeted by 9.5% while financials SP500.40 dropped by 8.2%. The Dow Jones Industrial Average ended down 1,861.82 points, or 6.9%, to 25,128.17 which was also the worst daily drop since March 16.
The Nasdaq Composite lost 527.62 points, or 5.3%, to close at 9,492.73 giving back gains above its highest levels on record through the 10,000’s.
The risk-off sentiment continued through Friday due to the FEDs outlook and rising concerns of a second coronavirus wave. The dollar ended the week stronger against major rivals as investors fled to safety.
EURUSD eased to a weekly low of 1.1212 but recovered to 1.1250. GBPUSD fell to 1.2473 amid poor UK data and stronger dollar demand. USDJPY eased to the 106.50 zone but recovered to end Friday in the green.
Crude oil finished little changed with WTI first falling to the $34 region before recovering the losses and ending a few points above the open at $36.50. Gold closed the week in gains amid renewed demand as a safe-haven.
FX analysts at Rabobank see the EURUSD continue down to the 1.09 region if the fear of a second coronavirus wave is validated.
“On the basis that there could be another rush into the safe-haven, USD if there is a second wave of Covid-19 or if investor confidence sags under the weight of poor economic news, we see scope for another dip lower in the 6-month horizon towards EUR/USD1.09.” – Rabobank.
Written by;
Nnadi Victor
An Independent Economics Researcher
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