Dollar on Back Foot after Fed and Improved Sentiment

The almighty U.S. dollar is nursing its losses after the U.S. Federal Reserve Board left the door open for more accommodative monetary policy to insulate the vast economic damage being done to their economy by the Covid-19 contagion.

The Fed also dampened expectations that the world’s largest economy will recover quickly from this widespread economic blow. The recovery could take several months or even, worst case scenario, years.

There is also improved sentiment in the financial markets as a possible cure for the Covid-19 virus is near. Counties are also easing lockdown restrictions. This reduced the demand for safe haven assets like the U.S. dollar.

Against the Japanese yen the dollar traded at 106.65 yen this morning. This is near a six week low price point.

The GBP/USD currency exchange rate was last trading at 1.2461. This Forex market added 0.3 percent on Wednesday.

The USD/CHF Forex market was flat trading at 0.9748.

Sentiment for the Dollar took a hit after Weak GDP Data

Even though the greenback remains king as the go to safe haven currency, the U.S. economy contracted in the first quarter at its fastest pace since the great depression.

The first quarter gross domestic product (GDP) contracted by 4.8 percent and economists think that this is just the tip of the iceberg. The economic data for the second quarter could be even worse.

Economists also believe that U.S. consumer spending will take several months to recover from the coronavirus blow as there have been massive job layoffs. This also dampens consumption which makes up about 70 percent of their GDP.

Later today, the United States will publish weekly unemployment claims data for the week ending 24 April.

Traders look towards today’s ECB Monetary Policy Decision

The euro is trading quietly before today’s monetary policy and interest rate decision from the European Central Bank. The ECB is likely to keep rates steady but extend their asset purchase program to include junk bonds. They will also introduce other non-standard monetary policy measures.

This comes as more European countries are easing lockdown conditions as Covid-19 infections slow. However, the economic damage to the Eurozone will be vast.