King Dollar Takes A Step Back

The US Dollar Index rallied sharply on Thursday, reaching its highest levels since January of 2017 and heading towards its largest weekly gain since the financial crisis of 2008. The greenback has soared in March due to its safe haven status and the scramble for cash amid the worsening coronavirus pandemic. However, the dollar took a pause on Friday, losing some ground against major rivals in early trading.

On Thursday, the European Central Bank (ECB) launched an emergency €750
BN package to address the economic fallout of the coronavirus. ECB president Christine Lagarde tweeted: “Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.” The euro sank to 3-year lows against the dollar on the news, before staging a rebound on Friday.

On Wednesday, the British pound cratered to its lowest levels against the dollar since 1985. In a surprise announcement on Thursday, the Bank of England (BOE) cut its interest rate by 15 basis points to an all time low of 0.10% and increased holdings of government bonds and corporate bonds by £200
BN to £645
BN. Sterling rallied on Friday on the heels of the BOE news and relative stabilisation in global markets.

The dollar also lost ground on Friday against the safe haven Japanese yen and Swiss franc. Meanwhile, risk sensitive currencies including the Australian dollar, New Zealand dollar and Canadian dollar all posted gains in early trading after falling to multi-year lows on Thursday.

Crude oil plunged to its lowest levels since 2002 on Wednesday. Oil prices surged on Thursday after President Trump said he would get involved in the global price war between OPEC and its allies at the “appropriate time” - also lifting the positively correlated Canadian dollar higher. Speaking at a press conference at the White House, Trump said; "We are trying to find some kind of middle ground."