Home > XE Currency Blog > XE Market Analysis: Europe - Aug 20, 2019

AD

XE Currency Blog

Topics6670 Posts6715
By XE Market Analysis August 20, 2019 3:32 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4598
    XE Market Analysis: Europe - Aug 20, 2019

    The Australian Dollar has traded firmer and, to a lesser extent, the New Zealand buck. The gains came despite Chinese stock markets sputtering, although other equity markets across the Asia-Pacific region performed better, continuing the recouperation from last week's acute phase of risk-off positioning. AUD-USD printed a five-day high, at 0.6795, as did AUD-JPY, at 72.36. The minutes to the early-August RBA policy meeting were released without surprises, affirming the central bank's wait-and-see-easing-bias stance while repeating the bank's view that the weaker currency will help exports and tourism. Among the other main currencies, there has remained a lack of directional impulse. EUR-USD has remained settled in the upper 1.1000s, holding below 1.1100, and USD-JPY has become anchored to an orbit of 106.50. The Dollar hasn't been much affected by U.S. President Trump's call for the Fed to cut rates by "at least 100 basis points". Fed's Rosengren pushed back against further rate cuts, saying that he is not convinced that slowing trade and global growth will significantly dent the economy. Overall investor sentiment is much less frayed that it was last week, with expectations for stimulus in major economies, along with Trump's partial climbdown in his trade war with China, assuaging recession fears.

    [EUR, USD]
    EUR-USD has retained a heavy tone, pushing below 1.1100 over the last day, which follows a one-week down phase from levels above 1.1200.We have been advocating a bearish view of the pairing given the ECB's course to easing in September and the risk of a no-deal Brexit, which in the event would be detrimental to the Eurozone economy. The revival in global stock markets, which has come with a partial de-escalation in the U.S.-China trade war and expectations for stimulus in major global economies, has also taken the pressure off the Fed to ease aggressively (notwithstanding President Trump's call for 100 bp of rate cuts).

    [USD, JPY]
    USD-JPY has become anchored to an orbit of 106.50. The dollar hasn't been much affected by U.S. President Trump's call for the Fed to cut rates by "at least 100 basis points". Fed's Rosengren pushed back against further rate cuts, saying that he is not convinced that slowing trade and global growth will significantly dent the economy. Overall investor sentiment is much less frayed that it was last week, with expectations for stimulus in major economies, along with Trump's partial climbdown in his trade war with China, assuaging recession fears. This in turn should for now keep USD-JPY and Yen crosses underpinned.

    [GBP, USD]
    Sterling has come under some pressure pressure, with Cable dipping below Monday's lows, nearing Friday's low at 1.2085. EUR-GBP has concurrently lifted back above 0.9150, putting in some distance in from the three-week low seen on Friday at 0.9090. The dip in the UK currency, which comes after it posted a rare up week last week, follows a Sunday Times report detailing a leaked a government document assessing the impact of a no-deal Brexit on the UK economy, which warned of food and medicine shortages, among other potential horrors. Market participants, meanwhile, are anticipating what promises to be a phase of high Brexit drama, which will commence when parliament returns from summer recess on September 3, when the anti-no-deal and pro-no-deal Brexit factions will do battle.

    [USD, CHF]
    EUR-CHF has settled around the 1.0850 mark after printing a fresh 25-month low at 1.0835 last Thursday amid volatility in equity markets and recession-portending inversions of the U.S. and UK yield curves, which fed safe haven demand for the Swiss currency (despite the punishing -0.75% deposit rate). While risk conditions have improved since last week, we retain a bearish view of the cross given ECB's course to additional monetary stimulus in September, and the risk of a disorderly no-deal Brexit on October 31.

    [USD, CAD]
    USD-CAD yesterday printed a three-session high at 1.3337, nearing the nine-day high at 1.3339 that was seen last Thursday, which came amid sharp oil price declines and after above-forecast U.S. retail sales and productivity data. USD-CAD support comes in at 1.3207-10.

    Paste link in email or IM