The dollar is set for its fifth-straight weekly loss on Friday as the ongoing spread of the coronavirus across the U.S. continues to threaten economic growth, but that could change if Democrat presidential hopeful Joe Biden wins in November, BofA said.
The dollar may weaken initially if Biden wins the November U.S. presidential election but would likely mount a rebound on the former vice president's proposed measures to support the economy.
In a Trump re-election in victory, all bets are off, and the dollar will likely continue on its current path lower, the bank said.
While Biden's proposed policies, particularly on taxes and regulation, appear less conducive to growth, his legislative agenda on the coronavirus and international trade are more supportive, BofA analysts said. "Biden's call for greater federal coordination on Covid testing/tracing represent a good trade-off between economic damage and virus control."
The continued weakness in the dollar comes as investors begin to doubt whether the U.S. economy's historical recovery powers will prevail once again in the wake of increased infections that have already shown signs of piercing through the nascent recovery.
The jobs market, which has underscored the recovery in the economy, has displayed weakness recently as weekly jobless claims increased for the first time since March 28.
The dollar is braced for a busy week of economic data releases, with second-quarter GDP – expected to show a 32% slump – durable goods, consumer confidence and jobs numbers on the calendar.
The greenback has also been hit by a surge in the euro, which accounts for about half of the weighting of the dollar index.
EUR/USD rose 0.44% to $1.1644
Reprinted from Investing.com, the copyright all reserved by the original author.
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