U.S. President Donald Trump, still being treated for COVID-19, abruptly ended coronavirus aid talks with Democrat lawmakers until after the election.
While top central bankers on Tuesday called for renewed government spending to support families and businesses, the US President cancelled ongoing negotiations in the U.S. House of Representatives.
Federal Reserve Chair Jerome Powell warned that the U.S. economy could slip into a downward spiral if the coronavirus is not effectively controlled and called for more economic assistance.
Trump broke off negotiations in a tweet and promised a major stimulus bill if he wins the Nov. 3 presidential election.
Trump’s surprise decision to call off stimulus talks increases downside risks for an already shaky U.S. economy. The outcome of the U.S. negotiations could influence the pace of the global economic recovery as well.
The initial shock eased when Trump later asked Congress to extend $25 billion in new payroll assistance to U.S. passenger airlines.
The battle against the coronavirus-triggered recession enters a new critical phase as the growth in new cases is again accelerating. Concurrently, whole industries and millions of households are still reeling from the restrictions imposed during the first viral wave.
Traders will look to minutes from the Fed’s most recent meeting for further signs of how central bankers view the outlook.
Further, Wednesday’s batch of economic data was not encouraging for the eurozone. German industrial output edged down in August after three months of gains. The data suggested the recovery in Europe’s largest economy from the coronavirus shock is starting to lose steam.
START TRADINGForex – Trump abruptly cancels coronavirus aid talks
The cancellation of the coronavirus aid talks in the U.S. House of Representatives heightened demand for safe-haven assets. Currencies had only just regained a sense of calm after Trump returned to the White House from the hospital.
The dollar index steadied on Wednesday after an initial jump triggered by U.S. President Donald Trump’s decision to cancel coronavirus aid talks. The dollar index was down 0.1% at 93.729.
The euro rose 0.26% to $1.1763 per euro, up 0.25%.
The increased risk aversion did not move the dollar against the yen. The Japanese currency lost some ground against the dollar, which moved about 0.4% higher at 106.07.
The Australian dollar edged up to $0.7119 after tumbling by more than 1% on Tuesday. Traders say the Aussie faces more downside risks. Experts expect that the Reserve Bank of Australia’s next move is to cut rates and buy more government debt.
Across the Tasman Sea, the New Zealand dollar bought $0.6591, close to a one-week low.
The Canadian dollar rose 0.2% against the greenback, with the loonie rebounding from an earlier one-week low.
Sterling, which made morning gains against the dollar, fell by 0.1% to $1.2855. Ireland’s foreign minister warned that fishing rights remained a big obstacle to a trade deal between Britain and the EU.
The pound was fractionally lower versus the euro at 91.23 pence.
Oil prices extended their decline. With West Texas Intermediate crude oil futures down 3% cents at $39.47 a barrel by 1132 GMT CLc1.
Gold was up 0.4% at 1133 GMT, at $1,884.58 per ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money