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Bloomberg reported that the California Governor Gavin Newsom has ordered the shutdown of indoor businesses including restaurants, bars, museums and movie theaters in 19 counties as the state grapples with a surge of infections from the coronavirus.

The areas affected include Los Angeles County, the hardest-hit part of the state, and in total account for about 70% of California’s population, Newsom said at a press briefing Wednesday.

After avoiding the worst of the virus’s wrath early in the pandemic, California is now grappling with an acceleration of infections. The state on Wednesday reported more than 9,700 new cases, its biggest daily jump so far. Total infections nearly doubled in the month of June, while hospitalizations are at a record.

Meanwhile, as market focus on the expected recovery of the US economy, despite the threat of the virus, in today’s Federal Reserve minutes, officials expressed general concern about the labour market remaining weak and inflation low. This is key to understand ahead pf this week’s Nonfarm Payrolls jobs data.

On the outlook for the labour market

“Prospects for further substantial improvement in the labour market were seen as depending on a sustained reopening of the economy, which in turn depended in large part on the efficacy of health measures taken to limit the effects of the coronavirus,” the minutes read. 

Further, the minutes went on the prostate, “On this issue, participants judged there to be a great deal of uncertainty and expressed concerns about the possibility that an early reopening would contribute to a significant increase of infections. Participants also regarded highly accommodative monetary policy and sustained support from the fiscal policy as likely to be needed to facilitate a durable recovery in labour market conditions. Overall, participants expected that a full recovery in employment would take some time.”

Officials’ fears about the labour market and the outlook in general have likely only been reinforced by the uptrend in COVID cases since the meeting was held three weeks ago.

Market implications

As the fed battles to keep the inflation target on track, markets will continue to be encouraged as the economy slowly recovers, which should be detrimental to the US dollar given that its safe-haven bid could continue to unwind. 

On the other hand, if the virus plays out ina worst-case scenario, a flight to safety in the US dollar could be the play, initially. 

Gold is also one to watch at this critical juncture as the price struggles to save face on failed attempts below the $1,800 level. 

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