US Dollar Under Pressure as Economic Outlook Worsens

US Dollar Under Pressure as Economic Outlook Worsens

Posted Wednesday, May 13, 2020 by
Arslan Butt • 1 min read

The US dollar is trading under slight pressure on Wednesday ahead of Fed chairman Jerome Powell’s address, even as markets worry about the possibility of the US central bank introducing negative interest rates amid the coronavirus crisis. At the time of writing, the US dollar index DXY is trading around 99.97.

Global financial markets continue to trade with a risk-off sentiment amid rising fears about an emerging second wave of coronavirus cases, especially in countries that have recently resumed economic activity. The US dollar is facing downside pressure after leading health official Anthony Fauci cautioned against reopening the US economy too soon and risking a resurgence in the pandemic.

Even as Fed officials played down market expectations for negative rates, President Donald Trump called for such a move, increasing traders’ bets on such a possibility in the near future. An extremely dovish Fed can further weaken the currency and send the dollar weaker against other major currencies.

The US dollar also turned bearish following the release of the CPI figures for April, which revealed that consumer prices fell by 0.8% amid the lockdown. This was the biggest drop in consumer prices seen since the Great Recession and has heightened worries about the US’s economic outlook.

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