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By xemarketanalysis May 25, 2018 9:52 am
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    XE Market Analysis: The Greenback Searching for TLC After Break-up Letter

    OVERVIEW

    • The Greenback is steady after its four-week rally came to a halt yesterday.
    • EM currencies remain under pressure with the Turkish Lira and the South African Rand down 0.6% on the day.
    • West Texas Intermediate (WTI) skids 2.5% on plans to ease production cuts.

    HIGHLIGHT

    Oil dropped below the $70 mark for a barrel after reports emerged that Saudi Arabia and OPEC partners are considering to increase supplies later this year. The WTI fell as much as 2.56% from today’s high, on course for the first weekly decline in four. Of note, WTI has risen close to 15% this year as the market continued to rebalance. Now, talks about a supply reset and a strong US Dollar are putting pressure on oil prices.  We expect volatility to pick up as we move closer to June OPEC June meeting. Commodity currencies will be under watchlists. Today, the NOK and CAD are down 0.3%, the worst performing G-10 currencies.   

    US DOLLAR

    The US Dollar is in search of some TLC this morning after the Singapore date was called off. The USD Index fell overnight as sentiment shifted to alert. The latest measured move from North Koreas seems to allay some market fear for now. The Dollar Index is now nudging higher after its recent one-way rally came to a halt. We have a fairly volatile session today. Investors await the durable goods numbers as well as Fed Chair Powell’s speech.  

    BRITISH POUND

    The Pound is down 0.4%, trading near the day’s low. UK GDP was revised or rather maintained at 0.1% quarter-over-quarter. The UK economy was stagnant with a weak consumer spending and companies slashing investment. Brexit woes are still hanging on investors’ minds. We should expect the GBP to remain under pressure. 

    EURO

    The Euro sees no end to its slide against the USD. EUR/USD is on course to finish the week in the red for 6 weeks in a row. The German IFO Business Climate came in line with market expectations after declining five months in succession. The optimistic expectations, however, has weakened slightly. There are also concerns that Italy’s populist revival will rekindle talks about EU fourth-largest economy to leave the single-currency bloc. EUR/USD is down 0.5% as we head into the final session of the week.

    CANADIAN DOLLAR

    A skidding oil price is taking its toll on the commodity-linked Canadian Loonie. The CAD is the worst performing G-10 currency weighed down also by trade concerns. The US Administration is planning to impose auto tariffs. These recent actions will once again call into question the fate of the NAFTA.  USD/CAD is expected to move closer to the 1.30 handle if these reports are confirmed.

    AUSTRALIAN DOLLAR

    The AUD is trading flat amidst growing bearish bias against the currency. Wage growth missed expectations and the RBA is expected to sit tight for at least till 2019. AUD/USD is closing the week down 0.4%.

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