Dubai, United Arab Emirates, 04 August 2020, (AETOSWire): Coronavirus pandemic, and the U.S – China trade tensions have recently hit the U.S extremely hard, which has resulted in a GDP falling a historic -32.9% in Q2 of 2020, slowing down from -5% in the previous period. Meanwhile, the US has already spent $3 trillion propping up the economy since the pandemic struck in March, which helped the short-term economic recovery from mid-April to June.
Reasons for USD sell-off and Technical Outlook
The greenback still struggling to find an upside momentum as concerns over the mounting number of infections, uncertainty around the next round of stimulus package and escalating tensions between the US and China. Moving ahead, the investors eagerly waiting for the next round of stimulus, the US is preparing further support for the economy. On the last FOMC meeting, The Fed Chairman Powell hinted that the economy would need additional support measures to cope with the outbreak of the economic crisis.
The Dollar index has broken down below 93.50 and at the time writing the currency pair sitting on key support at 92.50. Any break below 92.50 the next support at the 92/91.80 level and on the upper side the immediate resistance can be found at 93.50 and then 94.
When will the US economy recover?
Yet since then, the US has suffered a surge in new coronavirus cases, the country is still struggling to contain infection rates and deaths from COVID-19. According to the latest figures published by Johns Hopkins University in the US, there have been 4,294,770 confirmed cases and 148,056 deaths, with 1,325,804 people recovered from the virus. On the other hand, the tensions between US-China continue to escalate following the closure of China’s Houston, Texas consulate. In retaliation, China has ordered the U.S. consulate in Chengdu to cease operations.
So, until a vaccine or effective treatment for Covid-19 is available, the recovery of the U.S economy will not really get underway till the mid of 2021. However, the use of the potential vaccine can only be expected in early 2021.
“The economic costs of the crisis are being borne disproportionately by the poor and vulnerable, bringing into stark relief deep inequities that have long afflicted the US,” the IMF said.