Mass Protestations Weighing Heavily on the US Dollar

By  //  June 8, 2020

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There is growing weakness within the financial markets as the US dollar comes under increasing pressure due to the mass protestations held nationwide, including Florida.

There is growing weakness within the financial markets as the US dollar comes under increasing pressure due to the mass protestations held nationwide, including Florida.

Civil rights protests in the likes of Lakeland and Tampa against the shock treatment of George Floyd have caused mayhem, as have protests staged elsewhere in the states.

Impending curfews across the US, including Tampa, have hit the US economy, with the dollar weakening against all other major fiat currencies of late.

The US dollar has recently been considered something of a safe haven among financial investors and forex traders amid the global economic uncertainty.

However, the currency has become increasingly bearish against the major currency pairs within the DXY Index. The DXY Index compares the US dollar’s relative value against the Euro, the Japanese yen, the Pound sterling, the Canadian dollar, the Swedish krona and the Swiss franc.

The DXY is now trading more than 5% lower than its swing high recorded on March 20.

There is growing weakness within the financial markets as the US dollar comes under increasing pressure due to the mass protestations held nationwide, including Florida.

Curfews and disorder provide fresh hurdles for American economy

On the eve of June 1, New York City confirmed an evening curfew to tackle the civil unrest of late. The fact that major US cities are struggling to maintain law and order is another red flag for the dollar, which has seen the Pound sterling spike significantly of late and claw back some of the losses it has felt against the dollar in the last few weeks.

The Australian dollar has also experienced something of a seismic recovery against the US dollar, bouncing back spectacularly after plummeting to 17-year lows. Life in Australia appears to be rapidly returning to normal and their ability to breathe new life into their economy will certainly maintain the optimism surrounding the AUD.

The US dollar is at something of a knife-edge for the rest of June, if truth be told. The widespread protestations will result in one of two likely outcomes. The first would be eventual social reform measures and the second would be even greater authoritarianism. The reality is that both outcomes will be of great expense to the American coffers. Its deficit already stood at $4 trillion in 2020 and a further spending bill worth $3 trillion has also been approved by the House. Whichever way the current civil unrest ceases, it will lead to increased spending to resolve the social situation.

Wherever there is uncertainty there is volatility in the forex markets. It brings the markets firmly into the spotlight of retail traders that look to profit from rising and falling fiat currencies.

Choosing the right forex broker is vital for newcomers to forex, as is locating the best forex bonuses that allow people to trade without risking as much of their own money. With the optimism surrounding the US dollar fast waning, the Euro hit an 11-week high against the dollar.

US-China trade talks hang by a thread too

Aside from the civil unrest, the US also had increased furore regarding US-China trade tensions. Reports suggest that the Chinese government is preparing to hammer the final nail in the coffin of President Trump’s “phase-one” trade deal with China by calling upon Chinese agricultural firms to stop buying US soybeans, which is one of the largest agricultural exports from the US to the Far East and the backbone of the $200 billion extra exports discussed in their initial trade deal.

It’s not the case that China is ceasing exports of soybeans from overseas in its entirety. Far from it, in fact. Brazil posted record export figures to China in Q1 2020 at the same time America’s sales to the Far East fell off a cliff, well below the baseline of export levels to China recorded in 2017 and 2018.

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