On Thursday, the main currency pair EUR/USD was trading at 1.1600, which is the highest level since October 2018. The main factor strengthening the single currency appears to be the establishment of the recovery fund at the European Union summit in Brussels on Tuesday.
The GfK consumer sentiment indicator in Germany rose to -0.3 in August from -9.4 in the previous month. This was a much better publication than the market consensus of -5. It is noteworthy that this was the third consecutive month of improving consumer sentiment, which was contributed to by a temporary VAT reduction as part of the stimulus package introduced by the German government to help the economy emerge from the COVID-19 crisis. This also seems to have a positive impact on the euro.
On the broad market, it seems that the US dollar is being sold off, as evidenced by the systematic fall of the entire USD index. Such a development may also be influenced by fears of increased tension between the US and China. The Beijing authorities have reported that they have been notified by the authorities in Washington of the need to close the consulate in Houston. This was condemned by Beijing and would lead to the closure of the consulate in Wuhan.
The weakness of the dollar in the broad market may also have an impact on commodity prices. On exchanges, all of them are settled in American currency. So if the dollar falls, the commodities could gain in value. Therefore, one of the growth factors for oil, gold, and silver may be also the weak US dollar.
According to the political information relevant for Europe: the Italian government approved a proposal of about 25 billion euros of additional expenditure in the struggle to save the economy destroyed by the coronavirus pandemic, according to statements made by Italian officials.
Meanwhile, the total number of COVID-19 infections worldwide has exceeded 15 million. The three most affected countries are the United States, Brazil, and India - they are responsible for almost half of all confirmed cases in the world and over 40% of coronavirus fatalities, Bloomberg said.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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