02.04.202010:42 Forex Analysis & Reviews: Will the surge in COVID-19 infection finish off the dollar?

The global economy is currently being led by the coronavirus pandemic. Even the US economy, despite its strength, was affected by the virus. According to economists, in this situation, the negative impact on the dollar increases, so they seek to calculate the risks of this impact, and predict the future dynamics of USD.

Experts believe that in the short term, the dollar will lose its power and sharply sink. BNY Mellon also sees this scenario.

According to experts in BNY Mellon, the current strength of the dollar is temporary. While the scale of COVID-19 infection in the US is not close to its apogee, the dollar will show strength. However, as soon as the virus reaches its peak and starts to decline, the USD will lose all its advantages.

The protective properties of the dollar currently supports the currency. Its demand has grown sharply, only because other countries are doing their best to fight the coronavirus. According to a number of researchers, at the beginning of April 2020, the number of COVID-19 cases in the US is almost 190 thousand. Now, the number is growing exponentially, so US President Donald Trump is extremely concerned about the situation. Trump is confident that the next two weeks will be the most difficult for the US economy, as the number of infected in the US may increase even further.

The current US macro statistics also confirm the words of the US President. According to the Conference Board, the consumer confidence index of US fell to 120.0 last month, which is much lower than the February figure of 132.6. On Thursday, April 2, the statistics will be updated by ADP's report on the state of the US labor market. As data will probably be weak, leading experts predict that there will be another economic failure.

The dollar, at the moment, is very strong. The EUR / USD pair rose yesterday, but future forecasts show mixed trends. The attempts of the bears to reach 1.0850 and 1.0770 were unsuccessful. On the morning of Thursday, April 2, the EUR / USD pair was trading in the range of 1.0957–1.0959, trying to climb higher. Later, although the pair sank a little, it did not lose all its positions. According to experts, if the upcoming data on the US labor market is weak, traders will increase the number of long positions in USD.

Analysts expect that the US economy will fail in the second quarter. Moreover, throughout the year, it will take a lot of effort not to go into negative territory. Strategists at Goldman Sachs say that in the second quarter, despite the efforts of the Fed and the US authorities to mitigate the effects of the current recession, US GDP growth will be -34% yoy, and unemployment rate will rise to 15% by mid -2020. Note that although the US monetary authorities managed to curb the growth rate of the dollar, the demand for the currency is still high. According to analysts, the dollar will remain a priority among investors, until the crisis of the US health system, triggered by the pandemic, passes its peak.

Many experts believe that in the battle between the dollar and COVID-19, the former will still not lose its advantages. Indeed, the strength of the currency will be undermined, but it will not be completely broken. The high growth potential of the USD will remain.