Forex – Dollar Calm Ahead of Key Economic Data

Business Investing – The dollar has drifted in early European trade Wednesday, with worries over the resurgence of the Covid-19 virus competing with encouraging economic data for prominence.

At 2:50 AM ET (0650 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was largely flat at 97.343.

EUR/USD was flat at 1.1232, GBP/USD dropped 0.1% to 1.238, while USD/JPY was down 0.2% at 107.67. 

The U.S. recorded 47,000 infections on Tuesday, its biggest single-day spike since the pandemic began.

“Clearly we are not in total control right now,” the country’s top infectious disease expert, Anthony Fauci, told a Senate committee on Tuesday, adding that cases could increase by as much as 100,000 daily if the outbreak is not contained.

That said, the foreign exchange market has traded in tight ranges Wednesday, with investors wary ahead of some closely-watched economic data.

German retail sales soared 13.9% in May, data showed Wednesday, rebounding strongly after the fall of a revised 6.5% in April, while the Chinese manufacturing sector showed promising signs of recovery, according to the Caixin manufacturing PMI. 

Later Wednesday, the U.S. Institute for Supply Management’s purchasing managers’ index for manufacturing is expected to show that activity in June continued to recover from the 11-year low marked in April, while Thursday’s closely-watched U.S. nonfarm payrolls report is forecast to show the economy added 3 million jobs in June.

Also of interest will be the release of the FOMC minutes from the June meeting.

“Of particular interest are the Fed members’ discussions on yield curve control, as mentioned by Fed Chair Powell in his prepared remarks at the press conference after the policy announcement,” said analysts at Danske Bank, in a research note.

Elsewhere, Sweden’s Riksbank is set to make its latest rate announcement later Wednesday,  but market participants are not expecting a policy change.

“This time around it seems likely that the Riksbank will present actual forecasts for growth inflation and the policy rate rather than just different scenarios as was the case in the previous policy report,” Danske Bank added.

EUR/SEK traded flat at 10.4682 and USD/SEK at 9.3193.

Elsewhere, the Russian ruble fell to its lowest in over a month after fresh allegations in the U.S. press that it offered Afghan militia bounties for killing U.S. servicemen. The reports have heightened fears that the U.S. will broaden existing sanctions on Russia.