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Risk aversion drives the dollar higher | ZFX

Risk aversion drives the dollar higher

01-04-2020 10:54

During the European session on Wednesday, the dollar rose against major currencies, mainly because the market sentiment turned gloomy. Asian stock markets were generally weak, which the Nikkei and HSI closed lower. The major European stock markets are also following the trend, with FTSE, DAX, CAC, all falling by more than 3%.

ZFX analyst Jacob Leung said that the market may not be sensitive any more to the stimulus measures. Without "more shocking" news and measures, it may be no longer to boost the investment sentiment.

Analysis believes that the dollar rose against major currencies like Euro, Sterling and Aussie, reflecting the “safe-haven” market conditions. As the epidemic become long lasting, the global economy has fallen into a severe recession. "Cash" demand will continually support the dollar.

Goldman Sachs once again lowered the economic forecast for the second quarter of the United States that shrinking by as much as 34%. For the unemployment rate, Goldman Sachs expects that by the middle of this year, the US unemployment rate will be 15%. Standard & Poor's is relatively “optimistic”. The US economy is expected to contract by 12% in the second quarter, and the unemployment rate may reach 10%.

However, as a traditional safe-haven instrument, gold price was not strong in recent days, now is trading below $1600. Some analysis believed that if the U.S. economy fall into a severe recession due to the epidemic, the overall impact on gold market is mixed.

On Wednesday night, the US will release employment figure. The market currently expects the ADP will lose 150000 to 200000 jobs, which will be closely watched.