By Peter Nurse
Investing.com - The dollar pushed higher in early European trade Friday, helped by its safe haven status as coronavirus cases continued to surge in the United States and unemployment data pointed to a slow recovery in the labor market.
At 3:15 AM ET (0715 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.3% at 96.915. GBP/USD was down 0.2% at 1.2580, while USD/JPY was down 0.3% at 106.84.
The number of coronavirus cases in the U.S., the world’s economic engine, continues to grow, with more than 60,000 new Covid-19 infections reported on Thursday.
With populous states like California, Florida and Texas recently breaking records, and having to restart some social distancing measures, hopes are fading for an aggressive economic revival.
The number of Americans filing for jobless benefits dropped more than expected last week, data showed Thursday, but the figure remained above one million for the 16th straight week. Continuing claims also remained above 18 million, suggesting the labor market would take years to recover from the pandemic.
However, while the dollar gained against the euro Friday--EUR/USD was down 0.2% at 1.1263--it’s still a little lower against the single currency year to date. And further losses look likely.
“Recent virus problems in the U.S. present a material risk to the U.S. recovery in the coming months, whereas the euro area service sector recovery is set to continue barring any second virus waves during the European holiday season,” said analysts at Danske Bank, in a research note.
Danske Bank calls for EUR/USD to reach 1.15 on a one-three month time frame.
Adding to the sense of a European recovery, French industrial production increased sharply in May, up 19.6%, as lockdowns were eased and factories reopened.
Attention will now turn to the meeting of the EU leaders next week, to see if there can be agreement allowing the proposed 750 billion euro recovery fund to be distributed to the economies hit hardest by Covid-19 in the region, although also of interest with be Fitch's review of its credit rating for Italy.
"The question is whether Fitch decides to be tough and downgrade Italy. We expect that it will remain on hold given that the ECB and EU are showing strong support for Italy through QE and the expected recovery fund," said Danske Bank.
Elsewhere, the risk-linked Antipodean currencies gave up their gains from the previous day, with the AUD/USD pair down 0.5% to 0.6932 and the NZD/USD pair falling 0.12% to 0.6555, while the USD/CNY pair gained 0.3% to 7.0115.