The U.S. dollar gained on Wednesday after positive U.S. manufacturing data. On the other hand, the Australian dollar struggled last week. This comes after GDP data on Wednesday confirmed the country is in recession for the first time in three decades.
In the United States, Manufacturing activity increased more than expected in August, with new orders increasing. Despite that, factory employment, already declining before Covid-19 due to the Trump administration’s trade war with China, continued to lag.
The greenback has been on a losing trend for a while now, but it jumped against a basket of currencies overnight. The dollar gained 0.3% at 92.511 thus far. The news also boosted Asian and European indexes.
Even though the long-term economic fallout from Covid-19 is unknown, it is countries’ relative economic performance that drives exchange rates, along with monetary policy developments – stated Commerzbank analyst Thu Lan Nguyen.
She also added that the U.S. dollar benefited from much-improved ISM data yesterday, which suggests a continued high-speed recovery.
What about riskier currencies?
Several riskier currencies were steady on Wednesday, while others tumbled down. The Norwegian crown lowered by 0.2% versus the U.S. dollar. However, the Swedish crown and kiwi dollar changed insignificantly during the session.
The Australian dollar plummeted down after Australian GDP data confirmed the country’s economy declined by 7% in the three months to June, putting it in its first recession in nearly three decades.
The Aussie traded at 0.73525 versus the U.S. dollar, at last, recovering some losses but still lower by 0.3% on the day.
Meanwhile, the euro, which jumped above $1.20 on Tuesday for the first time since 2018, dropped below $1.19 again. It traded at $1.18785 at last, down by 0.3% since the previous session’s New York close.
Even though the euro showed no reaction to a slowdown in inflation on Tuesday, analysts stated that it raises problems for the European Central Bank in the future. German retail sales also declined unexpectedly, lowering by 0.9% in July.