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By XE Market Analysis October 23, 2020 2:53 pm
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    XE Market Analysis: Asia - Oct 23, 2020

    The Dollar moved modestly higher through the morning session, buoyed by safe-haven buying as Wall Street fell on dimming expectations for a new stimulus bill anytime soon. The two sides remain far apart on some items, like aid to states. The DXY rallied from opening lows of 92.67, later peaking at 92.96. The major equity indices later pared losses, which saw the USD cut some of its gains. There was little data to drive the markets, though Markit manufacturing and services PMIs both moved slightly further into expansionary territory, but had little impact. EUR-USD opened near 1.1860, later easing to 1.1826 lows before recovering some ground. USD-JPY was range bound between 104.65 and 104.88. USD-CAD headed to 1.3160 from 1.3118, while GBP-USD pulled back from 1.3122 to 1.3120.

    [EUR, USD]
    EUR-USD slipped from 1.1860 early highs to 1.1826 lows at mid-morning, as Wall Street turned early modest gains into losses on the back of lowered odds for a U.S. stimulus package. The two sides remain far apart on items such as aid to states and other non-Covid related items. According to Treasury Secretary Mnuchin in speaking to reporters, he said Speaker Pelosi has "dug in." The Euro may have seen its best levels for now, as the spike in Covid cases around the EU may prompt further ECB easing measures sooner than many expected. Increasing restrictions and lockdowns put Europe's economic recovery in jeopardy, and could force the Bank's hand.

    [USD, JPY]
    USD-JPY rallied from early lows of 104.65 to 104.88 highs, later easing under 104.75. Narrow trading ranges have returned following Wednesday's better than 100 point dive, which came largely on overall USD weakness. Risk-off conditions through much of the morning, largely due to dimming hopes for a fresh stimulus package anytime soon have supported the Dollar to a degree, though with the Yen belonging to the safe-haven club along with the USD, USD-JPY was confined to a narrow band on Friday.

    [GBP, USD]
    Cable rallied to a 1.3122 high on reports that Macron's government warned French Fishermen to expect a smaller catch. France had been the most vocal of the so-called coastal 8 EU nations that have been demanding unchanged access to UK waters for fishing, which has been the principal sticking point in trade talks, so the report is significant, revealing that a compromise appears to be in the works. Cable later fell back under 1.3020. It wasn't clear what the drove the fall back, though it appeared in part to have coincided with a bout of broader dollar gains.

    [USD, CHF]
    The Swiss franc has been trading with a firming bias, consistently rebounding from bouts of weakness in recent months and driving the EUR-CHF cross to levels under 1.0700 last week for the first time in three months. Markets are anticipating revamped monetary easing measures from the ECB while factoring in Brexit risk. The franc has a proclivity to ascend on the back of its balance of payments position. The SNB stated at its quarterly monetary policy review last month that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market."

    [USD, CAD]
    USD-CAD hit 1.3110 lows in London morning trade, down from Asian highs of 1.3158. The pairing was relatively steady early on, trading near 1.3125. Later, the pairing rallied to session highs of 1.3160 from opening levels near 1.3120. The move higher came as risk-off returned to Wall Street, while oil prices slid under the key $40 mark from earlier highs of $40.91. Thursday's 1.3177 high now marks resistance.

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