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By XE Market Analysis August 13, 2020 2:53 pm
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    XE Market Analysis: Asia - Aug 13, 2020

    The Dollar started Thursday's N.Y. session on a softer footing, though bottomed at mid-morning, spending the remainder of the day modestly on the rise. The DXY made its way from 92.94 lows to a high of 93.26. Encouraging drops in initial jobless claims and continuing claims ultimately helped USD sentiment. Wall Street was mixed, with the NASDAQ again outperforming. Treasury yields headed higher after a poor 30-year bond auction. EUR-USD headed from near 1.1825 to 1.1865, before dropping to near 1.1810. USD-JPY topped at 107.00, up from morning lows at 106.74. USD-CAD was rangebound between 1.3190 and 1.3226. GBP-USD meanwhile, opened near 103.85, later peaking at 1.3123 before falling back under 1.3070. Friday's U.S. calendar will feature July retail sales, Q2 productivity, July industrial production, June business inventories and preliminary August U. Michigan sentiment.

    [EUR, USD]
    EUR-USD headed from early lows of 1.1824, later peaking at a five-session high of 1.1865 at mid-morning. From there, the pairing dropped to 1.1815 ahead of the London close. While off its recent highs, the Euro has continued to benefit from the 750 bln euro recovery fund. The USD meanwhile, has been under some strain for some time, as the virus continues to keep the economic outlook clouded, while the Fed remains in full-bore easing mode. In addition, angst remains over the stalled stimulus package, which if passed would likely provide near term support for the USD.

    [USD, JPY]
    USD-JPY continues to trade on either side of its 50-day moving average at 106.85, opening at highs of 107.00 before slipping to 106.74 lows, and since recovering to 107.92. A relatively positive risk backdrop has kept some pressure on the Yen through the morning session. Most U.S. equity indices remained in the green, though the Dow remains lower as Cisco, Goldman Sachs and Walgreens lagged. A move above Thursday's 107.03 high would take USD-JPY to fresh three-week highs, and a look at the July 23 top of 107.24.

    [GBP, USD]
    Cable printed a three-session high of 1.3123 in N.Y, later pulling back under 1.3075 as the USD perked up in afternoon trade. We take a guarded view of the outlook for the Pound over the coming months, anticipating a plateauing in economic rebound momentum in the UK. Manchester, Preston, Bradford and Aberdeen are back in lockdown, and there are a number of new travel restrictions with other countries. The government furlough scheme will end in late October, which is likely to trigger a wave of job losses, particularly in the airline, retail and hospitality sectors. The Brexit endgame also remains unresolved, and is likely to remain an uncertainty into October.

    [USD, CHF]
    The Swiss franc has steadied below recent highs, sticking to the mid 1.07s on Thursday. The influence of the SNB's intervening hand seemed to have been at play. Weekly sight deposit figures out of Switzerland have been suggesting that the central bank has been continuing to sell francs regularly, as it has been since the consequences of the pandemic took a grip on markets, which had the impact of increasing demand for the Swiss currency. A rise in sight deposits (money held by commercial banks) can suggest francs turning up after being sold by the central bank. The advent of the EU's recovery fund, seen as a milestone by many analysts (a new liquid AAA fund that also reduces Eurozone breakup risks) has by many accounts caused a re-weighting of the common currency in portfolios, and which will help the SNB combat what it sees as a chronically overvalued franc.

    [USD, CAD]
    USD-CAD hit levels last seen on January 30, bottoming at 1.3190 lows, down from earlier highs of 1.3232. General USD weakness has returned in morning trade, and has been a driver of the pairing's move lower, as the DXY approached the two-year lows seen last week. Oil prices, while below trend highs, remain a CAD positive, with WTI crude holding over the $42.00 mark this morning. Later as USD sentiment picked up, the pairing headed back over 1.3226. The Canadian dollar will continue to remain sensitive to fluctuations in the U.S. dollar and oil prices going forward.

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