Forex Today: Dollar up as health, geopolitics replace consumer optimism, Powell, COVID-19 data eyed

Here is what you need to know on Wednesday, June 17:

The market mood is cooling as concerns about coronavirus outbreaks in the US and China, as well as two geopolitical clashes in Asia replace optimism about a quick recovery of the US economy. US housing figures and potentially more caution from Fed Chair Powell are on the cards.

COVID-19 infections and hospitalizations are accelerating in the US Sun Belt, with markets becoming sensitive to news from Texas, Florida, Arizona, and also Oklahoma, where President Donald Trump is set to hold a large rally on Saturday. The increases are balancing out ongoing improvement in the greater New York area. 

US data curbed some of the gains triggered by the superb US Retail Sales report for May, which saw a jump of 17.7%, more than double the expectations and serving as a full rebound from the fall in April. Hopes for a V-shaped recovery have resurfaced.

US Building Permits and Housing Starts for May are due out on Wednesday and are set to show a rebound after a downfall in April. 

Jerome Powell, Chairman of the Federal Reserve, warned that the economy may need more time to recover, especially the labor market, echoing his comments from the rate decision last week. He will resume his testimony on Capitol Hill on Wednesday and may urge lawmakers to act. 

Robert Kaplan, President of the Dallas branch of the Federal Reserve, said the economy may have bottomed out in May. However, he warned that a full recovery depends on resolving the health issue rather than fiscal or monetary stimulus.

Hope for battling coronavirus comes from research by Oxford University, which showed that a cheap steroid called Dexamethasone proved effective in saving lives in a randomized control trial, the gold standard of scientific research. The road to developing a vaccine is still long.

Authorities in Beijing have taken drastic measures such as grounding hundreds of flights and limiting other transport to curb a new outbreak, potentially stemming from a market. Around 137 people have been infected and come suspect the virus strain in the Chinese capital is more contagious than previous ones.

China and India clashed in the Galwan valley, a remote border region in the Himalayas. The violence resulted in several casualties among the world's most populated countries, which both have nuclear arms. The developments weigh on the mood and efforts to defuse tensions are underway.

South Korea said it will retaliate against any new military action from North Korea after the latter blew up a liaison office. Pyongyang is angered by activists distributing propaganda from across the border. 

GBP/USD is trading below 1.26 amid dollar strength and ahead of UK inflation figures, which are forecast to further decline in May. Labor market figures showed a worse than expected increase in claims in May while the unemployment rate remained low in April. Hopes for a Brexit breakthrough persist. 

EUR/USD is trading below 1.13, retreating amid dollar strength. Final eurozone inflation figures will likely confirm decelerating inflation. 

Gold returned to the $1,730 area, sticking to the range after a roundtrip to the downside. 

Oil prices have consolidated minor gains with WTI hovering around $37 and Brent above $40. Inventory data is due out.

USD/CAD is also set to move in response to inflation figures for May, which are predicted to bounce from the lows.

AUD/USD and NZD/USD are edging lower amid the risk-off mood. Both countries were successful in combating COVID-19 but have seen minor outbreaks recently. Flights between the countries may resume in a couple of weeks. 

Cryptocurrencies have stabilized with Bitcoin hovering around $9,500. 

More Why EUR/USD may rally, where to find the key to gold move, lots more – Interview with Richard Perry

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