The dollar index completes the week in positive territory. The demand for the greenback as a protective asset has grown in recent days due to the worsening situation with coronavirus in the USA and other developed countries of the world. America records a record increase in cases, an indicator even higher than peak levels in late April. Thus, the risks of the second wave of the pandemic are becoming more real. Nevertheless, traders are reluctant to win them back and try to find positive in a whole heap of negative news.
At the end of the week, the mood was mostly negative, the weekend can all change or worsen more. Much will depend on the rate of spread of coronavirus infection, as well as on what decision will be made regarding the reimplementation of the quarantine measures by the leaders of the States with the highest increase in COVID-19.
Recently, the US economic data has been mostly positive, which gave hope to traders to restore economic growth. However, the current unfavorable situation with coronavirus can change everything for the worse and significantly slow down the pace of economic recovery. This is most worrying for market players who are more supportive of defensive assets.
In addition to the spread of the virus, next week traders will focus on the release of the June NFP. This report will not only reflect the situation on the labor market in June but also shed light on the surprise that was presented to the markets in May. Judging by the weekly data from the American labor market, one should not count on another fabulous performance. The fact is that the weekly increase in initial applications for unemployment benefits in the United States exceeds forecast values. This week was most noticeable. The number of initial applications for unemployment benefits fell by only 60 thousand, to 1.48 million, while the markets were waiting for a decrease of 280 thousand, to 1.3 million. This means that the growth of layoffs this month is steadily ahead of market consensus.
However, the market cannot be so scared. It is unlikely that investors will be upset: the worse the recovery in employment is, the more likely it is to extend the generous income insurance that expires at the end of next month.
The applications received for more than one week amounted to 19.5 million with a forecast of 20.3 million. However, a weekly decline in the indicator is not consistent with the enchanting restart of the economy.
Undoubtedly, the data indicate that Americans are returning to work. Here again, there is a “but.” Improvement could occur due to features in reporting. California and Florida, for example, send data once every two weeks. This Thursday just fell out.
The main condition for receiving payments is the fact of deprivation of work. Due to the pandemic, the authorities have so far removed the second important condition, a person does not have to hurry to search for a new job. In the category of unemployed, only those who are actively seeking it are taken into account. This means that a significant proportion of the unemployed simply fell out and the underestimated unemployment rate of 13.3% can be safely ignored.
The topic of extending unemployment benefits is probably being actively discussed now, but it will most likely be covered after the publication of the unemployment report, which will allow the American authorities to clarify the size and conditions of the program.
The material has been provided by InstaForex Company – www.instaforex.com