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By XE Market Analysis August 5, 2020 4:37 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5194
    XE Market Analysis: Europe - Aug 05, 2020

    The dollar has remained soft while gold prices have spurted to a fresh nominal high at $2,040.55 (still a long way from a record peak in inflation-adjusted terms). Washington's policy stalemate on another pandemic relief bill has remained a major source of concern to investors, and most Treasury yields have pushed further into historic low territory. Though Wall Street found modest support on some signs of progress on a fiscal deal -- participants said they are getting closer while vowing to work around the clock -- both sides remained far apart. Markets are sensitive to this given that high frequency data is painting a picture of flagging growth momentum in the U.S. economy. The narrow trade-weighted USD index (DXY) ebbed under Tuesday's low at 93.15 on route to a 93.06 nadir. The new low marks a near two-thirds retrace of the dollar's rebound that was seen on Friday and Monday, from the 27-month low at 92.55 to the bounce peak at 93.99. EUR-USD concurrently lifted to a peak at 1.1817, its loftiest level sine Friday. Cable has seen a similar price action, as has AUD-USD, which printed a high at 0.7193, despite S&P Ratings putting Australia's state of Victoria on negative ratings watch as a consequence of the lockdown measures being taken there. USD-JPY ebbed to a five-day low at 105.51 on the back of the dollar's weakness, with the yen losing ground to the Australian dollar today and holding steady versus the euro and other currencies. USD-CAD fell to its lowest level since February, at 1.3266. Front-month WTI crude futures has remained buoyant after scaling to a 13-day high yesterday at $42.09.

    [EUR, USD]
    EUR-USD lifted to a peak at 1.1817, its loftiest level sine Friday and reflecting a renewed phase of dollar softness. Washington's policy stalemate on another pandemic relief bill has remained a major source of concern to investors, and most Treasury yields have pushed further into historic low territory. Though Wall Street found modest support on some signs of progress on a fiscal deal -- participants said they are getting closer while vowing to work around the clock -- both sides remained far apart. Markets are sensitive to this given that high frequency data is painting a picture of flagging growth momentum in the U.S. economy. The narrow trade-weighted USD index (DXY) ebbed under Tuesday's low at 93.15 on route to a 93.06 nadir. The new low marks a near two-thirds retrace of the dollar's rebound that was seen on Friday and Monday, from the 27-month low at 92.55 to the bounce peak at 93.99. Recent gains in the euro, which for a period came amid a risk-off backdrop in global markets, if nothing else demonstrates a new-found confidence in the common currency. The agreement on the EU's 750 bln 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. In Europe, localized bumps in new coronavirus cases (which many media outlets like to describe as "surges") have led to some new travel and other lockdown restrictions, though the reopening process remains largely intact. New cases in some of the recently afflicted states in the U.S., including Texas and Florida, have started to drop quite sharply. We remain EUR-USD bullish, anticipating a visit to the 1.2000 level.

    [USD, JPY]
    USD-JPY ebbed to a five-day low at 105.51 on the back of the dollar's weakness, with the yen losing ground to the Australian dollar today and holding steady versus the euro and other currencies. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

    [GBP, USD]
    Cable has been floated once again by a broad softening in the dollar. The pair scaled to a 1.3124 peak, extending the rebound from yesterday's six-day low at 1.2981 and drawing back in on last Friday's five-month peak at 1.3171. The pound has fared less well against the likes of the euro and Australian dollar, among other currencies. The pound outperformed last week amid signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. The final round of discussions is set for the week commencing October 2nd. Narratives last week had also been noting a pick-up in the pace of economic recovery in the UK, though final July manufacturing PMI was unexpectedly revised lower while localized lockdowns, including in the economically-important Manchester area, and the continued media-driven "feardemic," is clouding the outlook for the UK economy at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers was reduced this week). Recent dollar underperformance has been somewhat flattering the pound, which still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms. The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy.

    [USD, CHF]
    The Swiss franc has steadied below highs after showing a noticeable drop on Monday, as it did the Monday prior. The influence of the SNB's intervening hand seems 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. Last Monday, EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates, when is showed a 1% gain on one day. The crosses yesterday matched the two-month high that was first pegged last week at 1.0841. The seven-month peak, seen in early June, is at 1.0921. 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 has ebbed to its lowest level since February, at 1.3266, aided lower by both a generally soft U.S. dollar and with front-month WTI crude futures remaining buoyant after scaling to a 13-day high yesterday at $42.09. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

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    Topics7270 Posts7315
    By XE Market Analysis August 4, 2020 3:06 pm
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      XE Market Analysis Posts: 5194
      XE Market Analysis: Asia - Aug 04, 2020

      The Dollar attempted to rally early in the session on Tuesday, though it quickly turned lower through the remainder of the session. The DXY fell from early highs of 93.83, later bottoming at 93.34 in afternoon dealings. U.S. fiscal concerns appeared to be the driver of USD weakness. Chatter on the fiscal outlook stepped up last Friday as Fitch affirmed the U.S. AAA rating, though downgraded the outlook to negative. Incoming data today revealed a better June factory orders outcome, though there was little reaction. Wall Street was narrowly mixed through the session, while Treasury yields were lower. EUR-USD rallied from 1.1721 to 1.1791, as USD-JPY fell from 106.19 to 105.71. USD-CAD dropped from 1.3421 to 1.3345. GBP-USD meanwhile, opened at lows of 1.2981, making its way to 1.3071 highs after the London close. Wednesday's economic docket has the July ADP employment survey and the June trade report.

      [EUR, USD]
      EUR-USD turned higher at mid-morning rallying from lows of 1.1721 to 1.1791 after the London close. The Dollar has come under broad pressure through much of the session, after attempting to move higher in early trade. Hopes for a stimulus package in the U.S. have been dashed to a degree, being a weight on the USD, though at some point a package will likely be worked out, and another likely $2.5 tln of debt issued. At some point, the massive U.S. debt and deficits will put longer term pressure on the USD. For now, EUR-USD remains in buy-the-dip mode, with a near term upside target at 1.2000.

      [USD, JPY]
      USD-JPY peaked at 106.19 in early trade, and after ignoring the better factory orders data, slid to low of 105.71. The Dollar was broadly lower today, and could be reacting to uncertainty over the U.S. fiscal situation overall, along with signs of economic slowing. For USD-JPY specifically, today's dive in Treasury yields, in some cases to record lows, has likely been a catalyst for losses today. The Yen by and large remains sensitive to yields and risk levels. Wall Street is barely hanging on to gains, which could be putting some pressure on the pairing as well.

      [GBP, USD]
      Cable tested the waters back under 1.3000, printing a low at 1.2981. General USD weakness saw the pairing subsequently rally to 1.374 highs after the London close. Market talk of further USD losses has been making the rounds recently, as investors begin to take a closer look at the U.S. fiscal position, which has deteriorated fairly sharply over the past few month as debt levels increase by many trillion of Dollars over the past few months.

      [USD, CHF]
      EUR-CHF faltered on Tuesday, bottoming at 1.07738, after matching last week's near two-month high of 1.0841 in N.Y. on Monday. The cross continues to be supported however, by broad outperformance of the Euro and, possibly, the added influence of the SNB's intervening hand. Weekly sight deposit figures out of Switzerland suggest 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, back in March. Recent general Euro strength has provided the cross support. The pairing continues to trade comfortably above the series of lows near 1.0500 that were seen from March through to mid May. Committed SNB intervention prevented the 1.0500 level from being breached over this period.

      [USD, CAD]
      USD-CAD headed from London lows of 1.3358 before climbing to early North American highs of 1.3421. This morning's fall in WTI crude to just over the key $40 mark supported the pairing, as have moderately risk-off conditions, and a generally firmer USD. From there, as the USD headed broadly lower, and as oil prices rallied from near $40 to $42, USD-CAD slid to 1.3345. Oil prices, along with the direction of the Greenback will continue to influence the CAD going forward. USD-CAD support is now at Thursday's low of 1.3332, with resistance up at 1.3452, Monday's high. Canada's June trade report is due Wednesday.

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      Topics7270 Posts7315
      By XE Market Analysis August 4, 2020 7:06 am
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        XE Market Analysis Posts: 5194
        XE Market Analysis: North America - Aug 04, 2020

        The dollar has ebbed, particularly against the euro and Australian dollar. EUR-USD lifted above Monday's 1.1797 high in posting a peak at 1.1806, while AUD-USD came within a couple of pips of its Monday high at 0.7155. With USD-JPY holding a narrow range near 106.00, both EUR-JPY and AUD-JPY lifted, though both remained off their respective Monday peaks. The price action among the main forex pairings and cross rates belied a deteriorating risk appetite across asset markets, which saw European stock markets and U.S. equity futures turn lower during the European morning, more than giving back intraday gains. Asian stock markets closed higher, and the MSCI world equity index posted a five-month high. Disappointing earnings from the world's biggest spirits manufacturer Diago and German pharmaceutical company Bayer weighed on cyclical stocks across European bourses. Market narratives are also expressing increasing angst about the stalemate on Capitol Hill over the next pandemic relief fiscal package, along with U.S.-China tensions, which look likely to worsen into November's presidential election, and about Hurricane Isaias, which is bearing down on the Atlantic coast of the U.S. Against this backdrop, the USD index (DXY) drifted to a four-day low at 93.21, illustrating the dollar's recent fall from grace in terms of being a safe haven. On a more positive note, Germany's Ifo institute stated that there are signs of recovery in the auto manufacturing industry, while the daily tally of new coronavirus infections are now dropping sharply in Texas and Florida, and other recently afflicted states. The RBA left its cash rate unchanged following its August policy review today, and announced a resumption in bond buying from tomorrow "to ensure the yield on 3-year bonds remains consistent with the target." USD-CAD ebbed to a five-day low at 1.3358. Front-month WTI crude prices softened after yesterday hitting a five-day high at $41.22. Gold prices settled about $15-$20 off of yesterday's nominal record high at $1,997.00.

        [EUR, USD]
        EUR-USD has posted a fresh high at 1.1803, which extends the rebound from yesterday's eight-day low at 1.1696. The euro has concurrently lifted by a similar magnitude against the pound and yen, while holding steady versus the Australian dollar and Swiss franc. The gains in the euro come with European stocks and U.S. index futures having turned lower, which is nothing else demonstrates a new-found confidence in the common currency. The agreement on the EU's 750 bln 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. The stalemate on Capitol Hill over the next pandemic fiscal support bill and anxieties about Hurricane Isaias also seem to be weighing on the dollar. New Jersey governor has declared a state of emergency as the U.S. Atlantic coastal states brace for the storm. In Europe, localized bumps (which many media outlets like to describe as "surges") in new coronavirus cases have led to some new travel and other lockdown restrictions, though the reopening process remains largely intact. We have been anticipating EUR-USD to make a visit to the 1.2000 level.

        [USD, JPY]
        USD-JPY fell back below 106.00 during the London morning after printing a 10-day peak at 106.43 during the Tokyo session, which marked over a 2 big figure rise from Friday's five-month low at 104.18. Japan's Nikkeo 225 outperformed in Asia today, closing with a 2.2% gain, buoyed by the bounce in USD-JPY, while the MSCI Asia-Pacific index (ex Japan) ebbed by 0.5%. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

        [GBP, USD]
        Cable has made a rebound peak at 1.3108 after setting a five-day low at 1.3004 yesterday. The UK currency has been directionally more neutral against the euro and most other currencies. The pound outperformed last week, though still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance had been somewhat flattering the pound. Helping the pound last week were signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. Narratives last week had also been noting a pick-up in the pace of economic recovery in the UK, though final July manufacturing PMI was unexpectedly revised lower while localized lockdowns, including in the economically-important Manchester area, and the continued media-driven "feardemic," is clouding the outlook for the UK economy at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers has been reduced). The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy. The central bank will also release its quarterly policy review with revised growth and inflation forecasts.

        [USD, CHF]
        The Swiss franc again showed a noticeable drop on Monday, as it did the Monday prior. The influence of the SNB's intervening hand seems 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. Last Monday, EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates, when is showed a 1% gain on one day. The crosses yesterday matched the two-month high that was first pegged last week at 1.0841. The seven-month peak, seen in early June, is at 1.0921. 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 has ebbed to a five-day low at 1.3358. The low has been concomitant with front-month WTI crude prices remaining buoyant after yesterday hitting a five-day high at $41.22. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

        XE Currency Blog

        Topics7270 Posts7315
        By XE Market Analysis August 4, 2020 4:05 am
          XE Market Analysis's picture
          XE Market Analysis Posts: 5194
          XE Market Analysis: Europe - Aug 04, 2020

          The dollar has been ebbing moderately lower into the London interbank open, though has largely remained above lows seen on Monday. The USD index (DXY) drifted to a 96.43 low after yesterday's rebound capped out at a six-day high at 93.99. This has come amid a risk-on backdrop, which has propelled the MSCI Asia-Pacific index to gains of over 1%, along with lifting U.S. and European equity index futures. Strong manufacturing data out of the U.S. and elsewhere yesterday, continued gains in tech stocks, and Germany's Ifo institute stating that there are signs of recovery in the auto manufacturing industry, have been bullish tonic for asset markets, offsetting the stalemate on Capitol Hill over the next pandemic fiscal support bill and anxieties about Hurricane Isaias. New Jersey governor has declared a state of emergency as the U.S. Atlantic coastal states brace for the storm. EUR-USD lifted moderately, posting an intraday high at 1.1778, extending the rebound from yesterday's eight-day low at 1.1696. Cable saw a similar price action, making a rebound peak at 1.3089 after setting a five-day low at 1.3004 yesterday. USD-JPY plied a narrow range just above the 106.00, holding well within Monday's range. AUD-USD lifted to an intraday high at 0.7146, which is 9 pips shy of yesterday's peak. The RBA left its cash rate unchanged following its August policy review today, and announced a resumption in bond buying from tomorrow "to ensure the yield on 3-year bonds remains consistent with the target" of around 25 bp. The RBA adopted yield curve control back in March. Regarding the outlook, the central bank highlighted a likely "uneven and bumpy" recovery in the state of Victoria, which has gone lockdown in response to a flare up in coronavirus cases. Elsewhere, USD-CAD ebbed to a five-day low at 1.3358. Front-month WTI crude prices remained buoyant after yesterday hitting a five-day high at $41.22. Gold prices settled about $10-$15 off of yesterday's nominal record high at $1,997.00.

          [EUR, USD]
          EUR-USD has lifted moderately, posting an intraday high at 1.1778, extending the rebound from yesterday's eight-day low at 1.1696. The pair has continued, for now, to be driven by broader shifts in the dollar. The USD index (DXY) today drifted to a 96.43 low after yesterday's rebound capped out at a six-day high at 93.99. This has come amid a risk-on backdrop. Strong manufacturing data out of the U.S. and elsewhere yesterday, continued gains in tech stocks, and Germany's Ifo institute stating that there are signs of recovery in the auto manufacturing industry, have been bullish tonic for asset markets, offsetting the stalemate on Capitol Hill over the next pandemic fiscal support bill and anxieties about Hurricane Isaias. New Jersey governor has declared a state of emergency as the U.S. Atlantic coastal states brace for the storm. The impact of lockdown measures in response to the coronavirus remains a concern, too (although the media and many governments continue studiously overlook the evidence of herd immunity developing in places where it has run its course, such as most of Europe, along with the fact that the SARS Cov-2 coronavirus, while highly contagious and of genuine concern to the vulnerable, is not anywhere near a virulent for the broader population as feared back in March). In Europe, localized bumps in new cases have led to some new travel and other lockdown restrictions, though the reopening process remains largely intact. While the epidemic in Europe has passed, the "feardemic" of a second wave remains in full force. EUR-USD looks to remain in an overall up trend.

          [USD, JPY]
          USD-JPY has been plying a narrow range just above the 106.00, holding well within Monday's range, while the yen has posted moderate losses against most of the other main currencies amid backdrop of rallying global stock markets. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

          [GBP, USD]
          Cable has made a rebound peak at 1.3089 after setting a five-day low at 1.3004 yesterday. The UK currency has been directionally more neutral against the euro and most other currencies. The pound outperformed last week, though still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance had been somewhat flattering the pound. Helping the pound last week were signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. Narratives last week had also been noting a pick-up in the pace of economic recovery in the UK, though final July manufacturing PMI was unexpectedly revised lower while localized lockdowns, including in the economically-important Manchester area, and the continued media-driven "feardemic," is clouding the outlook for the UK economy at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers has been reduced). The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy. The central bank will also release its quarterly policy review with revised growth and inflation forecasts.

          [USD, CHF]
          The Swiss franc again showed a noticeable drop on Monday, as it did the Monday prior. The influence of the SNB's intervening hand seems 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. Last Monday, EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates, when is showed a 1% gain on one day. The crosses yesterday matched the two-month high that was first pegged last week at 1.0841. The seven-month peak, seen in early June, is at 1.0921. 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 has ebbed to a five-day low at 1.3358. The low has been concomitant with front-month WTI crude prices remaining buoyant after yesterday hitting a five-day high at $41.22. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

          XE Currency Blog

          Topics7270 Posts7315
          By XE Market Analysis August 3, 2020 3:04 pm
            XE Market Analysis's picture
            XE Market Analysis Posts: 5194
            XE Market Analysis: Asia - Aug 03, 2020

            The Dollar added to overnight gains early in N.Y. on Monday, though later faded following mixed U.S. data, which saw the July manufacturing ISM print slightly better, along with disappointing June construction spending figures. The DXY rallied from 93.38 lows overnight to a N.Y. high of 93.99, later fading under 93.60. Wall Street advanced as stronger than expected final PMIs out of the Eurozone, China, Japan and the U.S. the catalysts. The NASDAQ printed fresh record highs on an intra day basis. Treasuries remained weak. EUR-USD bottomed at 1.1696, later printing a high of 1.1758,. USD-JPY rallied from pre-open lows near 106.00, subsequently topping at 106.47 before fading into 106.05. USD-CAD peaked at 1.3451, up from London lows of 1.3399, but eased back under 1.3400 as oil prices were bid up in afternoon trade. Cable eased to 1.3005 in early trade, before bouncing to 1.3070.

            [EUR, USD]
            EUR-USD printed a one-week low in N.Y. trade, falling to 1.1696 early in the session after coming from 1.1796 in early Asia. Stronger European PMIs gave the Euro a bit of a boost during the London session, though the brief rally was quickly sold into. The DXY hit two-year lows on Friday, and we suspect today's USD bounce was driven by a fairly sharp round of short covering. The pairing later recovered to 1.1758 highs. Bigger picture, further EUR-USD gains are seen going forward, as economic uncertainty related to COVID should continue to weigh on the USD, as cases continue to climb, while the EU pandemic recovery fund should keep the EUR supported. In the near term, markets will be watching Washington to see how the next stimulus plays out. The lack of a deal will weigh on the Greenback.

            [USD, JPY]
            USD-JPY opened near 106.10, up from overnight lows of 105.58. The pairing later topped at 106.47 ahead of the data, then fell back to 106.07 lows, seemingly on a combination of the weaker construction spending report and sellers stepping in ahead of the 20-day moving average at 106.54. Nonetheless, the drop was modest. USD-JPY spent the remainder of the session rangebound between 106.05 and 106.20. Monday's risk on session limited downside, while the USD overall was relatively buoyant. From here, resistance is at the 20-day moving average at 106.55, with support at the overnight low at 105.58.

            [GBP, USD]
            Cable fell from 1.3113 highs seen in London, falling under 1.3115 into the N.Y open, eventually touching 1.3005 in early N.Y., before bouncing to 1.3070. Helping the pound last week were signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy.

            [USD, CHF]
            EUR-CHF matched last week's near two-month high of 1.0841 in N.Y. on Monday. The cross continues to be supported however, by broad outperformance of the Euro and, possibly, the added influence of the SNB's intervening hand. Weekly sight deposit figures out of Switzerland suggest 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, back in March. Recent general Euro strength has provided the cross support. The pairing continues to trade comfortably above the series of lows near 1.0500 that were seen from March through to mid May. Committed SNB intervention prevented the 1.0500 level from being breached over this period.

            [USD, CAD]
            USD-CAD headed up to two-session highs of 1.3451 in early North America, up from Asian lows of 1.3388. The move higher came despite relatively firm oil prices and a risk-on backdrop, generally a CAD-positive. Today though, with the USD's early resurgence generally, USD-CAD was dragged higher. Later, gains faded as WTI crude advanced over 2% over $41.00, resulting in a 1.3380 low. Resistance is now at last Thursday's 1.3461 high, with support see at Friday's 1.3369 low.

            XE Currency Blog

            Topics7270 Posts7315
            By XE Market Analysis August 3, 2020 7:34 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5194
              XE Market Analysis: North America - Aug 03, 2020

              The dollar is up for a second consecutive trading day, with the narrow trade-weighted USD index posting its best level since last Tuesday, at 93.83, extending a rebound from the 25-month low that was seen on Friday at 92.55. EUR-USD concurrently ebbed below Friday's low on route to a low at 1.1717, extending the correction from Friday's 26-month peak at 1.1910. Cable similarly put in some distance from Friday's 1.3171 trend peak in pulling back to a low at 1.3013. USD-JPY printed a 10-day peak at 106.43, which is over 2 big figures up on Friday's five-month low at 104.18, before ebbing back under 106.00. AUD-USD descended to 0.7097, which is the pair's lowest level since last Tuesday and extends a correction from the 17-month peak that was seen on Friday at 0.7229. USD-CAD has traded firmer and tested Friday's high at 1.3441. Oil prices are trading relatively steadily, above Friday's correction lows. Gold prices hit a fresh nominal record peak soon after the open in Asia-Pacific markets today, at $1,994.20, before capping out and settling to near net unchanged levels under $1,980.00. Stock markets in Asia were mixed, while equities gained in Europe, along with U.S. index futures. Japan's Nikkeo 225 outperformed, closing with a 2.2% gain, buoyed by the bounce in USD-JPY, while the MSCI Asia-Pacific index (ex Japan) ebbed by 0.5%. Europe's STOXX 50 was up 1.6% in early PM trading. Above-forecast final July manufacturing PMI readings came in from China, Japan and the Eurozone, while the UK's version was unexpectedly revised lower. Congress in the U.S. is struggling to finalize a new fiscal relief package, despite pandemic-era unemployment benefits having expired on Friday. The impact of lockdown measures in response to the pandemic/"feardemic", remains a concern, too, although the media and many governments continue studiously overlook the evidence of herd immunity developing in places where it has run its course, such as most of Europe, along with the fact that the SARS Cov-2 coronavirus, while highly contagious and of genuine concern for the vulnerable, is not anywhere near a virulent for the broader population as feared back in March.

              [EUR, USD]
              EUR-USD has ebbed below Friday's low on route to a low at 1.1736, extending the correction from Friday's 26-month peak at 1.1910. The dollar has once again been driving the pair, with the U.S. currency staging a rebound following a period of pronounced underperformance. The dollar's gains today come despite the struggles of Congress in the U.S. to finalize a new fiscal relief package, even with pandemic-era unemployment benefits having expired on Friday. The consequence is that more than 30 million U.S. citizens are seeing their income drop by 50%-75%. Following the historic 32.9% y/y contraction in Q2 GDP, and with many states exercising lockdown measures, the pressure is on. The impact of lockdown measures in response to the coronavirus remains a concern, too (although the media and many governments continue studiously overlook the evidence of herd immunity developing in places where it has run its course, such as most of Europe, along with the fact that the SARS Cov-2 coronavirus, while highly contagious and of genuine concern for the vulnerable, is not anywhere near a virulent for the broader population as feared back in March). In Europe, localized bumps in new cases have led to some new travel and other lockdown restrictions, though the reopening process remains largely intact. While the epidemic in Europe has passed, the "feardemic" of a second wave remains in full force. EUR-USD is in correction mode at present, but still looks to be amid an overall up trend.

              [USD, JPY]
              USD-JPY fell back below 106.00 during the London morning after printing a 10-day peak at 106.43 during the Tokyo session, which marked over a 2 big figure rise from Friday's five-month low at 104.18. Japan's Nikkeo 225 outperformed in Asia today, closing with a 2.2% gain, buoyed by the bounce in USD-JPY, while the MSCI Asia-Pacific index (ex Japan) ebbed by 0.5%. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

              [GBP, USD]
              Cable has put in some distance from Friday's 1.3171 trend peak in pulling back to a low at 1.3037. A rebound in the U.S. currency has been at play. The UK currency outperformed last week, though still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance had been somewhat flattering the pound. Helping the pound last week were signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. Narratives last week had also been noting a pick-up in the pace of economic recovery in the UK, as evidenced by the much stronger than forecast preliminary July PMI data and improvement in the CBI's July distributive sales report, which flagged a near full recovery in the retail sector, with sales in upcoming months seen at near seasonal norms. However, localized lockdowns, including in the economically-important Manchester area, and the continued full-throttled media-driven "feardemic," is clouding the outlook for the UK economy at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers has been reduced). The UK calendar this week is highlighted by the BoE's August Monetary Policy Committee meeting (announcing on Thursday), where a no change in interest rates and asset purchase settings are widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy. The central bank will also release its quarterly policy review with revised growth and inflation forecasts.

              [USD, CHF]
              The Swiss franc is again showing a noticeable drop, as it did last Monday, with the currency showing a loss of over 0.5% against both the dollar and euro. The influence of the SNB's intervening hand seems to be a 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. Last Monday, EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates, when is showed a 1% gain on one day. A two-month high was pegged at 1.0841 before the cross took a rotation lower. The high so far today is at 1.0814. The seven-month peak, seen in early June, is at 1.0921. 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 has traded firmer and tested Friday's high at 1.3441. Oil prices are trading relatively steadily, above last week's correction lows. Front-month WTI crude futures hit a three-week low last Thursday at $38.72, and while since recouping to levels near $40.0, remain down by over 4% from week-ago levels. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

              XE Currency Blog

              Topics7270 Posts7315
              By XE Market Analysis August 3, 2020 4:32 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5194
                XE Market Analysis: Europe - Aug 03, 2020

                The dollar has lifted, with the narrow trade-weighted USD index posting its best level since last Thursday, at 93.70, extending a rebound from the 25-month low that was seen on Friday at 92.55. EUR-USD concurrently ebbed to a below Friday's low on route to a low at 1.1741, extending the correction from Friday's 26-month peak at 1.1910. Cable similarly put in some distance from Friday's 1.3171 trend peak in pulling back to a low at 1.3057. USD-JPY printed a 10-day peak at 106.43, which is over 2 big figures up on Friday's five-month low at 104.18. AUD-USD descended to 0.7118, which is the pair's lowest level since last Tuesday and extends a correction from the 17-month peak that was seen on Friday at 0.7229. USD-CAD has traded firmer, though has remained within its Friday range, posting an intraday high at 1.3429. Oil prices are trading relatively steadily, above Friday's correction lows. Gold prices hit a fresh nominal record peak soon after the open in Asia-Pacific markets today, at $1,994.20, before capping out and settling to near net unchanged levels under $1,980.00. Stock markets in Asia have been mixed, while S&P 500 futures decline moderately. Japan's Nikkeo 225 outperformed, closing with a 2.2% gain, buoyed by the bounce in USD-JPY, while the MSCI Asia-Pacific index (ex Japan) ebbed by 0.5%. In news, the U.S. Congress is struggling to finalize a new fiscal relief package, despite pandemic-era unemployment benefits having expired on Friday. The impact of lockdown measures in response to the coronavirus remains a concern, too, although the media and many governments continue studiously overlooking the evidence of herd immunity developing in places where it has run its course (and not to mention that the SARS Cov-2 coronavirus, while highly contagious and bad news for the vulnerable, is not anywhere near a virulent for the broader population as feared back in March).

                [EUR, USD]
                EUR-USD ebbed below Friday's low on route to a low at 1.1741, extending the correction from Friday's 26-month peak at 1.1910. The dollar has once again been driving the pair, with the U.S. currency staging a rebound following a period of pronounced underperformance. The dollar's gains today come despite the U.S. Congress struggles to finalize a new fiscal relief package, even with pandemic-era unemployment benefits having expired on Friday. More than 30 million U.S. citizens will see there income drop by 50%-75% after today's expiry in the crisis unemployment benefits. Following the historic 32.9% y/y contraction in Q2 GDP, and with many states exercising lockdown measures, the pressure is on. The impact of lockdown measures in response to the coronavirus remains a concern, too, although the media and many governments continue studiously overlooking the evidence of herd immunity developing in places where it has run its course, such as most of Europe (and not to mention that the SARS Cov-2 coronavirus, while highly contagious and bad news for the vulnerable, is not anywhere near a virulent for the broader population as feared back in March). In Europe, localized bumps in new cases and led to some new travel restrictions, though the reopening process remains largely intact. EUR-USD, while in correction mode at present, still looks to be amid an overall up trend.

                [USD, JPY]
                USD-JPY printed a 10-day peak at 106.43, which is over 2 big figures up on Friday's five-month low at 104.18. Japan's Nikkeo 225 outperformed in Asia today, closing with a 2.2% gain, buoyed by the bounce in USD-JPY, while the MSCI Asia-Pacific index (ex Japan) ebbed by 0.5%. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

                [GBP, USD]
                Cable has put in some distance from Friday's 1.3171 trend peak in pulling back to a low at 1.3057. A rebound in the U.S. currency has been at play. The UK currency outperformed last week, though still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance has been somewhat flattering the pound. Nevertheless, there are some convincing bullish arguments in market narratives. One is the pick-up in the pace of economic recovery in the UK, as evidenced by the much stronger than forecast preliminary July PMI data and improvement in the CBI's July distributive sales report, which flagged a near full recovery in the retail sector, with sales in upcoming months seen at near seasonal norms. There has also been signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. We see scope for Cable returning to levels around the 1.3500 mark.

                [USD, CHF]
                The Swiss franc has steadied at firmer levels after dropping quite sharply against the euro last Monday, which reflected broad outperformance of the common currency and, possibly, the added influence of the SNB's intervening hand. 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. EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates for a spell last week, showing a 1% gain on one day. A two-month high was pegged at 1.0841 before the cross took a rotation lower. The seven-month peak, seen in early June, is at 1.0921. 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.

                [USD, CAD]
                USD-CAD has traded firmer, though has remained within its Friday range, posting an intraday high at 1.3429. Oil prices are trading relatively steadily, above Friday's correction lows. Front-month WTI crude futures hit a three-week low last Thursday at $38.72, and while since recouping to levels near $40.0, remain down by over 4% from week-ago levels. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

                XE Currency Blog

                Topics7270 Posts7315
                By XE Market Analysis July 31, 2020 4:30 pm
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5194
                  XE Market Analysis: Asia - Jul 31, 2020

                  The DXY recovered from two-year lows of 92.55 seen overnight, then rallied to 93.53 highs through the morning session. Week-end and Month end Dollar short covering appeared to be the main driver. Incoming data was mixed, leaving personal income and PCE a bit weaker then expected, the Chicago PMI better, while the final U. Mich sentiment softened as well. Wall Street traded lower through the morning, though perked up in afternoon trade, as House Democrats said they would cancel the August recess, and stay in D.C. to work on the stimulus package. All three major indices closed in the Green. Treasury yields remained near historic lows. EUR-USD eased from early lows of 1.1853, later hitting a low of 1.1763. USD-JPY bottomed at 104.93 before rallying to 106.06. USD-CAD was rangebound between 1.3436 and 1.3369. GBP-USD pulled back from trend highs at 1.3170 to 1.3081.

                  [EUR, USD]
                  EUR-USD topped 27-month highs of 1.1908 in early London. Many days of gains this week and last and an approaching week-end and month-end prompted a solid round of profit taking. Ahead of the London close, the pairing had fallen back to under 1.1765. We see further EUR-USD gains going forward, as economic uncertainty related to COVID should continue to weigh on the USD, as cases continue to climb, while the EU pandemic recovery fund should keep the EUR supported.

                  [USD, JPY]
                  USD-JPY rebounded from the near five-month low of 104.19 seen in Asia, running up to 106.06 into the London close. As was the case with EUR-USD on Friday, pre-weekend month-end position squaring drove the pairing higher. USD-JPY had dropped from 106.21 highs on Monday to Friday's 104.19 lows. The pairing rose despite the risk-off backdrop, as the Yen generally strengthens as equities fall. We expect further USD-JPY downside once the crowded short trade neutralizes.

                  [GBP, USD]
                  Cable hit fresh highs, printing a new five-month peak at 1.3170 while. There didn't appear to be any specific catalyst behind Sterling's rally, and indeed, the pairing fell back to 1.3081 lows in N.Y., likely on month-end profit taking. UK trade representative Frost said Thursday that trade talks with the EU remained "deadlocked, though Prime Minister Johnson said that the two sides were "not that far apart." The pound's gains today should be viewed in context of a significant shift in valuations of major currencies. Month end rebalancing may also have been a factor, especially heading into August, which is the peak of the summer holiday season in London and Europe.

                  [USD, CHF]
                  EUR-CHF was steady in the mid-1.07s in N.Y. on Friday, after topping at 1.0841 on Monday. The cross continues to be supported however, by broad outperformance of the Euro and, possibly, the added influence of the SNB's intervening hand. Weekly sight deposit figures out of Switzerland suggest 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, back in March. Recent general Euro strength has provided the cross support. The pairing continues to trade comfortably above the series of lows near 1.0500 that were seen from March through to mid May. Committed SNB intervention prevented the 1.0500 level from being breached over this period.

                  [USD, CAD]
                  USD-CAD was relatively quiet through the North American session, remaining inside of Thursday's trading band. The pairing topped at 1.3436 early in the session, after largely shrugging of the Canada GDP and prices data, later falling back to 1.3369, before topping over 1.3415. Wednesday's 7-week low of 1.3331 now marks support, with resistance at the July 22 high of 1.3484, then at the 20-day moving average of 1.3523.

                  XE Currency Blog

                  Topics7270 Posts7315
                  By XE Market Analysis July 31, 2020 7:29 am
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5194
                    XE Market Analysis: North America - Jul 31, 2020

                    The dollar pared intraday declines that were largely seen ahead of the London open. The narrow trade-weighted USD index printed a fresh 26-month low at 92.59, the culmination of a 5% decline from the finishing level in June and marking just over a 10% drop from the highs seen in early March, before lifting to a rebound high at 92.97. EUR-USD concurrently ebbed to the mid 1.1800s after pegging a 26-month high at 1.1908. Cable, AUD-USD, among other pairings, have seen a similar action. European stock markets and U.S. equity index futures posted moderate gains following a mostly negative session in Asia. A profit taking impulse has been observed in some market narratives heading into the weekend, with the rejection by top Republicans of President Trump's Tweet suggestion that the upcoming presidential election be delayed has also got some mention (with Congress having sole power to change the election date). There remains a lot of bearishness in the forex market about the dollar, however. Congress and the White House remain deadlocked over the next stimulus bill (the Senate has adjourned on the issue until Monday), and markets are likely to sensitive to how big the package will be. More than 30 million U.S. citizens will see there income drop by 50%-75% after today's expiry in the crisis unemployment benefits. Following the historic 32.9% y/y contraction in Q2 GDP, and with many states exercising lockdown measures, the pressure is on.

                    [EUR, USD]
                    EUR-USD has ebbed back to the mid 1.1700s after yesterday printing a new 22-month peak at 1.1805. The dip reflects a rebound in the dollar from yesterday's post-Fed announcement lows, with the narrow trade-weighted USD index lifting above 93.50 after pinning a fresh 25-month low at 93.18. Fed Chairman Powell gave an unambiguously strong commitment to continued ultra-accommodative policy ("not even thinking about thinking about thinking raising rates"), though there were no changes in terms of the 0%-0.25% rate band, QE, or hints on forward guidance, which left speculative participants in profit taking mood after building up substantial short positions into the Fed's policy review. Focus in the U.S. now switches to the final phase of political wrangling over the next fiscal package. Concerns about the impact of localized lockdown measures, particularly in the U.S., also remain. In Europe, localized bumps in new cases and led to some new travel restrictions, though the reopening process remains largely intact. We retain a bullish stance on EUR-USD, anticipating a visit of the 1.2000 level.

                    [USD, JPY]
                    USD-JPY has lifted out of a five-month low as the dollar rebounds from its post-GDP losses, and with European stock markets and U.S. equity index futures posting moderate gains. USD-JPY has posted rebound high at 104.81, leaving a five-month low at 104.14. The yen is near net unchanged levels versus the euro and Australian dollar. Data out of Asia today were highlighted by encouraging July PMI survey data out of China, and an above-forecast 2.7% m/m rise in Japanese production. Japan's Okinawa prefecture is set to announce a state of emergency again, due to a spike in new coronavirus cases, according Fuji news, re-reported by other media. The more economically important Tokyo and Osaka prefectures remain open. The BoJ left is bond buying operations largely unchanged at a monthly review.

                    [GBP, USD]
                    Cable pinned a new five-month peak, at 1.3145. The pair is now firmly back in pre-lockdown territory. The UK currency still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance has been somewhat flattering the pound. Nevertheless, there are some convincing bullish arguments in market narratives. One is the pick-up in the pace of economic recovery in the UK, as evidenced by the much stronger than forecast preliminary July PMI data and improvement in the CBI's July distributive sales report, which flagged a near full recovery in the retail sector, with sales in upcoming months seen at near seasonal norms. There has also been signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. We see scope for Cable returning to levels around the 1.3500 mark.

                    [USD, CHF]
                    The Swiss franc has steadied at firmer levels after dropping quite sharply against the euro on Monday, which reflected broad outperformance of the common currency and, possibly, the added influence of the SNB's intervening hand. 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. EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates on Monday, rising by over 1% at intraday highs. A seven-week high was pegged at 1.0841. The seven-month peak, seen in early June, is at 1.0921. 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.

                    [USD, CAD]
                    USD-CAD has been an exception to the U.S. dollar weakening theme, with the pairing consolidating after making a nine-day high at 1.3461 yesterday. The Canadian dollar has been affected by a the drop in oil prices over the last day. Front-month WTI crude futures hit a three-week low on Thursday at $38.72, and while since recouping to levels near $40.0, remain down by over 2.5% from week-ago levels. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail global asset markets.

                    XE Currency Blog

                    Topics7270 Posts7315
                    By XE Market Analysis July 31, 2020 3:59 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5194
                      XE Market Analysis: Europe - Jul 31, 2020

                      The dollar continued lower in what is now the biggest monthly decline the U.S. currency has seen in a decade. The narrow trade-weighted USD index printed a fresh 26-month low at 92.59, the culmination of a 5% decline from the finishing level in June and marking just over a 10% drop from the highs seen in early March. U.S. Treasury yields have printed fresh lows, with the 30-year bond in record low territory, extending declines seen since yesterday's release of U.S. Q2 GDP data, which came in at a dismal -32.9% y/y, although this met the consensus expectation. President Trump's Tweeted suggestion that the presidential election in November should be postponed has also been in the mix, added a political element to arguments that the pandemic has precipitated a further erosion in the dollar's reserve currency status. The EU's recently greenlighted recovery fund is also seen as a first step in shared fiscal responsibility in the Eurozone, which by all accounts has triggered a re-weighting of euros in currency portfolios at the expense of the dollar. Gold prices have lifted to back within a couple of dollars of the record nominal high seen earlier in the week at $1,974.90. EUR-USD, amid its sixth consecutive week of accelerating gains, has pegged a fresh 26-month high at 1.1908. Cable pinned a new five-month peak, at 1.3143. USD-JPY posted a five-month low at 104.19. AUD-USD saw a 17-month high at 0.7228. USD-CAD has been an exception to the U.S. dollar weakening theme, with the pairing consolidating in the lower 1.3400s after making a nine-day high at 1.3461 yesterday. The Canadian dollar has been affected by a the drop in oil prices over the last day. Front-month WTI crude futures hit a three-week low on Thursday at $38.72, and while since recouping to levels near $40.0, remain down by over 2.5% from week-ago levels. Data out of Asia today were highlighted by encouraging July PMI survey data out of China, and an above-forecast 2.7% m/m rise in Japanese production.

                      [EUR, USD]
                      EUR-USD, amid its sixth consecutive week of accelerating gains, has pegged a fresh 26-month high at 1.1908. The latest up phase reflects continued broad dollar declines in what is now the biggest monthly decline the U.S. currency has seen in a decade. The narrow trade-weighted USD index printed a fresh 26-month low at 92.59, the culmination of a 5% decline from the finishing level in June and marking just over a 10% drop from the highs seen in early March. U.S. Treasury yields have printed fresh lows today, with the 30-year bond in record low territory, extending declines seen since yesterday's release of U.S. Q2 GDP data, which came in at a dismal -32.9% y/y, although this met the consensus expectation. President Trump's Tweeted suggestion that the presidential election in November should be postponed has also been in the mix, added a political element to arguments that the pandemic has precipitated a further erosion in the dollar's reserve currency status. The EU's recently greenlighted recovery fund is also seen as a first step in shared fiscal responsibility in the Eurozone, which by all accounts has triggered a re-weighting of euros in currency portfolios at the expense of the dollar. Focus in the U.S. now switches to the final phase of political wrangling over the next fiscal package. Concerns about the impact of localized lockdown measures, particularly in the U.S., also remain. In Europe, localized bumps in new cases and led to some new travel restrictions, though the reopening process remains largely intact. For EUR-USD, we have been anticipating a visit of the 1.2000 level.

                      [USD, JPY]
                      USD-JPY posted a five-month low at 104.19, driven by dollar weakness. The yen has traded softer, meanwhile, against the likes of the euro and Australian dollar, with a paring in stock market losses on many Asian bourses, and a gain in U.S. equity index futures, lifting safe haven pressure from the Japanese currency. Data out of Asia today were highlighted by encouraging July PMI survey data out of China, and an above-forecast 2.7% m/m rise in Japanese production. The Japanese currency is likely to remain apt to directional change on the back of shifting risk premia in global markets. While the BoJ remains committed to uber stimulus, the central bank is no longer unique in this regard (a reflection of this was the 2-year UK yield recently dipping below Japan's 2-year yield for the first time ever), and so has been having little weakening impact on the Japanese currency relative to peers. Backed by a surplus economy, and one where yield-seeking domestic investors are apt to invest in foreign assets during times of confidence, but repatriate funds when times are uncertain, the yen has built up a reputation as a reliable haven currency.

                      [GBP, USD]
                      Cable pinned a new five-month peak, at 1.3143. The pair is now firmly back in pre-lockdown territory. The UK currency still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance has been somewhat flattering the pound. Nevertheless, there are some convincing bullish arguments in market narratives. One is the pick-up in the pace of economic recovery in the UK, as evidenced by the much stronger than forecast preliminary July PMI data and improvement in the CBI's July distributive sales report, which flagged a near full recovery in the retail sector, with sales in upcoming months seen at near seasonal norms. There has also been signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. We see scope for Cable returning to levels around the 1.3500 mark.

                      [USD, CHF]
                      The Swiss franc has steadied at firmer levels after dropping quite sharply against the euro on Monday, which reflected broad outperformance of the common currency and, possibly, the added influence of the SNB's intervening hand. 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. EUR-CHF made a rare appearance on the 'biggest daily mover' list out of the main dollar pairings and associated cross rates on Monday, rising by over 1% at intraday highs. A seven-week high was pegged at 1.0841. The seven-month peak, seen in early June, is at 1.0921. 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.

                      [USD, CAD]
                      USD-CAD has been an exception to the U.S. dollar weakening theme, with the pairing consolidating after making a nine-day high at 1.3461 yesterday. The Canadian dollar has been affected by a the drop in oil prices over the last day. Front-month WTI crude futures hit a three-week low on Thursday at $38.72, and while since recouping to levels near $40.0, remain down by over 2.5% from week-ago levels. The Canadian dollar will likely remain hostage to fluctuations to the U.S. dollar and oil prices. Downside risks for the Canadian dollar include the OPEC+ group's course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail global asset markets.

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