By Peter Nurse
Investing.com – The dollar traded higher in Europe Tuesday, with the global safe haven receiving a boost from concerns of a Covid-induced global economic slowdown as well as escalating political turmoil in Afghanistan.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 92.757.
USD/JPY was 0.1% higher at 109.31, EUR/USD was 0.1% lower at 1.1764, while GBP/USD fell 0.3% to 1.3804, despite solid U.K. employment data, with the number of employees on British company payrolls rising by 182,000 in July from June, moving closer to their pre-pandemic level.
“Political developments in Afghanistan could well be adding to the ongoing deterioration of the global risk environment due to Covid and the re-rating of Asia’s growth outlook,” said analysts at ING, in a note.
The disappointing data from China on Monday, when July industrial production and retail sales fell more than expected, is still causing investors to rethink the growth profile of the world’s second-largest economy as it continues to deal with its latest Covid-19 outbreak.
The turmoil in Afghanistan has also helped safe havens of all stripes, with concerns that a new Taliban regime could foster instability in neighboring Pakistan and elsewhere in Asia.
The release of U.S. retail sales for July later in the session is expected to add to the concerns of a global slowdown, as consumer spending is likely to be hit by the reemergence of the Covid virus.
Also of interest, U.S. Federal Reserve Chairman Jerome Powell will speak at a town hall for educators later in the day. However, it is widely expected that he will not address monetary policy at this meeting but wait until the central bank’s Jackson Hole symposium, due to take place next week.
Elsewhere, NZD/USD fell 1.3% to 0.6927 after New Zealand announced a national lockdown after discovering its first community case of Covid-19 in six months. The development may stop the Reserve Bank of New Zealand tightening policy at its next meeting on Wednesday.
The Reserve Bank of New Zealand is widely expected to authorize the first hike in the country’s benchmark interest rate since 2014.
The Reserve Bank of Australia surprised markets at the meeting by sticking to its plan to start tapering bond buying, but the minutes sounded a more dovish tone, saying the central bank would be prepared to take further policy action should coronavirus lockdowns across the country threaten a deeper economic setback.