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By xemarketanalysis June 29, 2018 11:31 am
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    XE Market Analysis: US Dollar Poised to Cross the Q2 as the Winner

    OVERVIEW

    • The Greenback is on track to finish strongly against the G-10 currencies.
    • Indian Rupee is at lifetime lows despite RBI’s intervention.
    • CNY slides further for the 11th day in a row.
    • WTI ending the week strongly, up 42 cents to $73.87 a barrel.

    HIGHLIGHT

    USD/INR rose to a lifetime high on the back of increasing current account deficit, stronger Dollar, and higher oil prices. The Reserve Bank of India intervened in the market to halt the slide. The INR is the worst performer among Asian currencies, down nearly 7.5% so far this year. With EM currencies under pressure recently, it may come as no surprise to many that investors are moving flows out of local bonds and equities. RBI’s REER data shows that INR is still overvalued. A breach of the 70 mark could come into play in the medium term. 

    US DOLLAR

    The US Dollar is trading lower vis-à-vis the G-10 currencies this morning. The Dollar Index is down 0.6% after the release of weaker than expected personal spending growth. Core PCE print came at 2% YoY. Investors are ready to square off open positions ahead of the weekend and as the quarter closes. World equity indices are in the green and the EU Summit seems to deliver an immigration deal. The Indian currency is recovering after falling to lifetime low against the Greenback. The INR remains the worst performer in Asia, falling 6.75% since the beginning of the year. MXN is strengthening ahead of Sunday’s election.

    BRITISH POUND

    The British Pound bounced from a seven-month low after data showed the economy expanded more than the previous estimate. GDP was revised upwards to 0.2% from 0.1%.  The upbeat data brings back the case for a rate increase by the Bank of England. The currency is still down 6% against the Greenback since April. Brexit issues have a major source of uncertainty. Chancellor Merkel is meeting with PM May next week and there is a hope that they will find a common ground on Brexit.

    EURO

    The Euro got an unexpected boost after the EU leaders seem to agree on some sort of arrangement on immigration issues. EUR/USD moved higher 0.7% on the news. However, EU Chief Negotiator Barnier said that on Brexit, they have “made some progress, but huge and serious divergence remains”. This could tamper Euro bulls and put a lid on any further rise.

    CANADIAN DOLLAR

    The Canadian Dollar is trading with a weak tone for a second day. Local businesses are starting to feel the pinch of trade tariffs. Corporates want the federal government to revisit taxation policies to improve competitiveness. There are no local data releases scheduled for today and most of the moves in USD/CAD will be exogenous. 

    AUSTRALIAN DOLLAR

    The Australian Dollar is heading for a third weekly decline. AUD/USD lost 3.8% of its spot value since the end of March.  Escalating global trade tensions have kept the currency under pressure. China’s announcement that it will open access to various industries may prove to provide a short to medium term solace for the Aussie.

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