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By XE Market Analysis July 31, 2020 3:59 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5195
    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.

    XE Currency Blog

    Topics7271 Posts7316
    By XE Market Analysis July 30, 2020 2:58 pm
      XE Market Analysis's picture
      XE Market Analysis Posts: 5195
      XE Market Analysis: Asia - Jul 30, 2020

      The DXY printed fresh two-year lows in N.Y. on Thursday, printing a base of 93.04, after opening at 93.61. The plunge in Q2 GDP, along with the rise in both initial jobless claims and continuing claims dented sentiment overall, seeing stock slide, and Treasury yields fall to record lows. The USD was impacted by the data, though continues to suffer from the lowering of expectations for the U.S. economic outlook. As the FOMC said on Wednesday, the ongoing pandemic "will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." Further Dollar losses can be expected. EUR-USD climbed from 1.1750 to trend highs of 1.1832, as USD-JPY fell from 105.28 to 104.81. USD-CAD bottomed at 1.3394, later peaking near 1.3450. GBP-USD made trend highs of 1.3087, up from opening lows of 1.3006.

      [EUR, USD]
      EUR-USD printed a 25-month high of 1.1832 after the London close, up from opening lows at 1.1743. The Dollar remains under severe pressure, as the DXY has made fresh trend lows nine of the last ten reading sessions. Economic uncertainty related to COVID has weighed on the USD, as cases continue to climb, while the EU pandemic recovery fund has supported the Euro. The next upside target is the June 2018 high of 1.1853.

      [USD, JPY]
      USD-JPY bottomed at 104.92 in the aftermath of the U.S. data and crumbling equities, down from early highs of 105.28, though above Wednesday's near five-month low of 104.76. The pairing later bounced to 105.18 highs, with the modest move higher coming as Wall Street pared some losses. Gains were not to last however, as the pairing fell back to 104.81 after the London close. The outlook remains uncertain for the USD, as the fate of the stimulus package up in the air, and the COVID spikes crimping the economic recovery picture. The Dollar appears to have lost its safe haven appeal of late, and as a result, USD-JPY should have further downside potential should risk-off continue.

      [GBP, USD]
      The Pound continued its outperforming streak, showing a better than 0.5% average gain versus the Dollar in N.Y. on Thursday. 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 should this be the case.

      [USD, CHF]
      EUR-CHF retreated to the mid-1.07s in N.Y. on Wednesday, 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 rallied to seven-session highs of 1.3458, up from North American lows of 1.3394. The move higher came as oil prices took a tumble, with WTI crude falling as much as 5% to under $39.00/bbl. Also supportive of the pairing was the sharp risk-off backdrop, which came following the rise in U.S. jobless claims and continuing claims. The pairing later dipped back to 1.34.14 USD-CAD resistance is now at the July 22 high of 1.3484, followed by the 20-day moving average at 1.3501.

      XE Currency Blog

      Topics7271 Posts7316
      By XE Market Analysis July 30, 2020 7:28 am
        XE Market Analysis's picture
        XE Market Analysis Posts: 5195
        XE Market Analysis: North America - Jul 30, 2020

        The dollar has managed a rebound from post-Fed lows, with the narrow trade-weighted USD index lifting above 93.50 after pinning a fresh 25-month low at 93.18. Speculative participants had built up a large net short dollar position going in to the FOMC, and a consequential profit taking motive has helped fuel the dollar's bounce after Fed Chairman Powell's expectedly signalled a continued commitment to ultra-accommodative policy. Stock markets sagged in Europe as focus shifted to a flood of incoming corporate earnings reports and political wrangling in the U.S. over the new coronavirus fiscal relief package, with President Trump having stated yesterday that the White House and Democrats were still far apart on the issue. The pressure is on as the $600 per week pandemic unemployment benefit expires tomorrow. USD-JPY ebbed to the 105.00 level after printing a post-Fed rebound high at 105.30. EUR-USD droped to the mid 1.1700s after printing a new 22-month peak at 1.1805 yesterday. The commodity currencies stand out for underperforming today. Both AUD-USD and NZD-USD have racked up declines of over 0.6%, with the former pegging a two-day low at 0.7128 after peaking at a 15-month high at 0.7196 in the wake of the Fed announcement. USD-CAD lifted by 0.6% in posting a two-day high at 1.3426. Front-month WTI crude futures fell by over 1.5% during the London morning, printing a three-day low at $40.60. S&P 500 futures were showing a decline of 0.9%. Gold prices retreated after making a fresh nominal record high yesterday at $1,974.90.

        [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 recouped to a two-day high at 105.29 after printing a five-month low at 104.76 in the wake of the Fed announcement yesterday, which saw Chair Powell give a strong commitment to continued ultra-accommodative policy. The low was seen as the dollar dropped across-the-board, while the recovery today was seen in Asia before petering out as stock markets in Europe came under pressure, which in turn catalyst a rebound in the yen. The yen remains among the currency outperformers this week, alongside the euro and pound. 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 found a footing feet after sinking under 1.2950. The pair yesterday peaked at 1.3013, the loftiest level seen since the pre-lockdown days of early March. Sterling has been in the outperforming lane over the last couple of days, 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 (outperforming Eurozone PMIs and showing the private sector to be back in expansion for the first time since lockdown) and the CBI's July distributive sales report, which flagged a near full recovery in the retail sector (by rising to a +4 headline, up from -37 in June and the best reading since April last year, 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. An FT article this week asserted that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the ECJ (European Court of Justice), and that "while further work is needed, a middle ground is clearly emerging". This followed a Reuters report earlier in the week that EU trade negotiator Barnier believes UK PM Johnson wants a deal, despite the UK government's often repeated assertion that it's willing to take the UK out of the single market at year-end without a new trade deal if it doesn't get what it wants. 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 lifted by over 0.6% in posting a three-day high at 1.3426, recouping from the seven-week lows seen earlier in the week. Profit taking of U.S. dollar shorts, built up into the Fed's policy review this week, has been the theme, while oil prices have ebbed, too, which is imparting some pressure on the Canadian dollar and other oil correlating currencies. Front-month WTI crude futures fell by over 1.5% during the London morning, printing a three-day low at $40.60. 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

        Topics7271 Posts7316
        By XE Market Analysis July 30, 2020 4:27 am
          XE Market Analysis's picture
          XE Market Analysis Posts: 5195
          XE Market Analysis: Europe - Jul 30, 2020

          The dollar has managed a rebound from post-Fed 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. USD-JPY recouped to a two-day high at 105.29 after printing a five-month low at 104.76 in the wake of the Fed. The pair's recovery today in Asia has been concomitant with rallying stock markets, which has fostered a rotation out of safe haven positions in the Japanese currency. The yen still remains among the currency outperformers this week, alongside the euro and pound. EUR-USD ebbed back to the mid 1.1700s after printing a new 22-month peak at 1.1805. Cable sank back under 1.2950 after peaking at 1.3013, which is the loftiest level seen since the pre-lockdown days of early March. The commodity currencies stand out for underperforming today, despite the backdrop of mostly higher stock markets in Asia, which underscores the profit taking theme in forex markets after a phase of shorting dollars into the FOMC. Both AUD-USD and NZD-USD have racked up declines of over 0.6%, with the former pegging a two-day low at 0.7132 after peaking at a 15-month high at 0.7196 in the wake of the Fed announcement. USD-CAD lifted by 0.5% in posting a two-day high at 1.3404. Oil prices have continued to ply a narrow range off recent five-month highs. Gold prices retreated after making a fresh nominal record high yesterday at $1,974.90. S&P 500 futures have dropped by 0.6% in overnight trading after the cash version of the index closed on Wall Street yesterday with a 1.2% gain. 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.

          [EUR, USD]
          EUR-USD ebbed back to the mid 1.1700s after 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, though the rate of new coronavirus cases appears to be stabilizing, falling by 2% last week, which fits the Gompertz curve of respiratory virus outbreaks. The coronavirus data show a death rate of about 1 in 2000 and average age of mortalities of over 80, which is, for all the media hype, much more benign than was been feared back in March when the now infamous Imperial College model (used by politicians to justify lockdowns) was forecasting 2.2 mln deaths in the U.S. and over 20 mln globally. In Europe there are a number of localized spikes in new virus cases, which is causing much commotion and new travel restrictions, though such bumps have been seen before, such as Sweden in June, which at the time invited much derision from the WHO and many in the media as the country never went lockdown and where most people don't ware masks, only for the rate of new cases to retreat back to a classic Gompertz curve profile, which strongly implies an increasingly level of herd immunity. Both Sweden and Europe's overall all-cause mortality rates are currently trending below long-term averages. As for EUR-USD, we retain a bullish stance, anticipating a visit of the 1.2000 level.

          [USD, JPY]
          USD-JPY recouped to a two-day high at 105.29 after printing a five-month low at 104.76 in the wake of the Fed announcement yesterday, which saw Chair Powell give a strong commitment to continued ultra-accommodative policy. The low was seen as the dollar dropped across-the-board, while the recovery today in Asia has been seen as stock markets rallied, which fostered a rotation out of safe haven positions in the Japanese currency. The yen still remains among the currency outperformers this week, alongside the euro and pound. 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 sank back under 1.2950 after peaking at 1.3013, which is the loftiest level seen since the pre-lockdown days of early March. Sterling has been in the outperforming lane over the previous couple of days, 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 (outperforming Eurozone PMIs and showing the private sector to be back in expansion for the first time since lockdown) and the CBI's July distributive sales report, which flagged a near full recovery in the retail sector (by rising to a +4 headline, up from -37 in June and the best reading since April last year, 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. An FT article this week asserted that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the ECJ (European Court of Justice), and that "while further work is needed, a middle ground is clearly emerging". This followed a Reuters report earlier in the week that EU trade negotiator Barnier believes UK PM Johnson wants a deal, despite the UK government's often repeated assertion that it's willing to take the UK out of the single market at year-end without a new trade deal if it doesn't get what it wants. 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 lifted by 0.5% in posting a two-day high at 1.3404, recouping from the seven-week lows seen earlier in the week. Profit taking of U.S. dollar shorts, built up into the Fed's policy review this week, has been the theme today. Oil prices have continued to ply a narrow range off recent five-month highs. 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

          Topics7271 Posts7316
          By XE Market Analysis July 29, 2020 3:57 pm
            XE Market Analysis's picture
            XE Market Analysis Posts: 5195
            XE Market Analysis: Asia - Jul 29, 2020

            The DXY was moderately lower though the N.Y. morning session, with trade cautious ahead of the FOMC announcement. Incoming early data saw the advance June goods trade deficit narrow more than expected, and pending home sales for June soar. The dollar headed lower following the FOMC announcement, where the statement said the ongoing pandemic "will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." Powell started the press conference saying the path forward for the economy remains "extraordinarily" uncertain. EUR-USD topped at trend highs of 1.1795, up from 1.1780, as USD-JPY hit trend lows of 104.81, down from near 105.00. USD-CAD fell from 1.3375 highs to 1.3331. GBP crossed above the 1.3000 mark. Wall Street headed to session highs after the Fed, while yields nudged slightly lower.

            [EUR, USD]
            EUR-USD remained buoyant, pulling up to within just two points from Monday's 1.1782 trend highs ahead of the FOMC announcement. Tuesday's modest Dollar rebound, largely attributed to short covering, was short lived, as the DXY today touched fresh low, to levels last seen in March of 2018. The Euro popped to 1.1805 highs following the Fed announcement, with traders interpreting the statement as dovish overall. Economic uncertainty related to COVID has weighed on the USD, while the EU pandemic recovery fund has supported the Euro over the past couple of weeks. More USD downside can be expected for now.

            [USD, JPY]
            USD-JPY recovered mildly from the 7-week low of 104. 81 low seen in London morning trade, since rallying to 105.21 highs, then dipping back under the 105.00 mark. The outlook remains uncertain for the USD, as the fate of the stimulus package up in the air, and the COVID spikes crimping the economic recovery picture. The Dollar appears to have lost its safe haven appeal of late, and as a result, USD-JPY should have further downside potential should risk-off related to the economy continue. The pairing fell to trend lows of 104.81 after the dovish FOMC announcement.

            [GBP, USD]
            Sterling outperformed over the last day, seeing Cable rise to a new five-month peak of 1.2995 in N.Y. morning trade, putting the pairing back at pre-lockdown levels. Recent dollar underperformance has been a driver of GBP-USD strength. Nevertheless, there are some convincing bullish arguments in market narratives. One is the pick-up in the pace of economic recovery in the UK. There has also been signs that have led markets to factor improved odds for a EU-UK trade deal. We now see scope for Cable returning to levels around the 1.3500 mark. The Pound headed over 1.3000 for the first time since since March 10 after the FOMC.

            [USD, CHF]
            EUR-CHF retreated to the mid-1.07s in N.Y. on Wednesday, after topping at 1.0841 on Monday. The cross continues to be supported however, by broad outperformance of the common currency 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 had fallen back over the last few weeks, though has continued 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. SNB policy, which stuck with negative rates for the foreseeable future and strengthened its commitment to intensify FX intervention if necessary to keep the CHF under control.

            [USD, CAD]
            USD-CAD remained above the seven-week low of 1.3329 printed on Tuesday, bottoming at 1.1338 ahead of the North American open. The pairing chopped around between 1.3371 and 1.3341 through the morning session, more recently peaking at 1.3376. USD-CAD remains near the top of its intra day trading band despite WTI crude prices remaining above the $41.00 mark, and the improved risk backdrop. Oil demand still appears to have downside risk, as worsening pandemic risks weigh on the economic outlook. As a result, further USD-CAD downside may be limited going forward. Following the FOMC announcement, USD-CAD headed back to near lows on general USD softness.

            XE Currency Blog

            Topics7271 Posts7316
            By XE Market Analysis July 29, 2020 7:26 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5195
              XE Market Analysis: North America - Jul 29, 2020

              The dollar has been trading soft-to-steady, seeing new lows against some currencies and nudging the narrow trade-weighted USD index to a new 25-month low at 93.40. EUR-USD is showing modest gains, though has also remained with its Tuesday range and below the 22-month high see yesterday at 1.1782. Cable, meanwhile, lifted to a new five-month high at 1.2979, aided in part as markets factor in increased odds for the UK reaching a trade deal with the EU. AUD-USD also whittled out a fresh trend high, at 0.7194. USD-CAD settled near the 1.3350 mark, above Tuesday's seven-week low at 1.3329. USD-JPY printed a new five-month low at 104.81. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the dollar and New Zealand dollar, with over a 2% advance versus both underperformers. A sputtering price action in global equity markets has driven safe haven demand into the yen, with the dollar evidently perceived to be no longer providing protection. Profit taking and position trimming has been a theme across markets over the last day into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is some uncertainty about outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections, alongside geopolitical tensions, have also been in the mix. Regarding the Fed, no policy changes are expected, though forex markets will be laser-focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the dollar, further. The U.S. 10-year TIPS (inflation-protected security) hit a record low at -0.92% last week.

              [EUR, USD]
              EUR-USD is showing modest gains on the day, though has also remained within its Tuesday range and below the 22-month high see yesterday at 1.1782. The dollar is amid a second day of trading steadily, consolidating the sharp declines seen over the prior 10 days. Markets are in a directional stasis into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package. Regarding the Fed, no policy changes are expected, though forex markets will be laser focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the dollar, further. The U.S. 10-year TIPS (inflation-protected security) hit a record low at -0.92% last week. As for the euro, the common currency had perhaps been due a correction after rallying strongly in the advent of the EU's 750 bln euro recovery fund. We see upside risk with regard to the dollar, which could sustain the correction in EUR-USD. We don't expect any changes from the Fed to the policy stance, QE, or forward guidance as we believe the framework review, expected last month, has been put off until the Fall, at least. We do still expect a very cautious stance from Chairman Powell given the retrenchment in reopening, spike in jobless claims, uncertainty over the new fiscal package and rise in geopolitical tensions, but there is a risk that markets will be left slightly underwhelmed. One positive for the U.S. is that the rate of new coronavirus cases appears to be stabilizing, falling by 2% last week, which fits the Gompertz curve of respiratory virus outbreaks, with a death rate of about 1 in 2000 and average age of mortalities of over 80.

              [USD, JPY]
              USD-JPY edged out a new near five-month low at 104.81. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the dollar and New Zealand dollar, with just over a 2% advance versus both underperformers. The sputtering price action in global equity markets has driven safe haven demand into the yen, with the dollar evidently perceived to be no longer providing protection (amid speculation that the Fed will shift to becoming more tolerate to the risks of higher inflation, which has been pressing down on real U.S. yields). Profit taking and position trimming has been a theme across markets over the last day into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is a degree of uncertainty about outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections have also been in the mix. 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 edged out a new five-month high, at 1.2979. Recent dollar weakness has been flattering the pound, though the currency has firmed against most other currencies over the last day, inspired by an FT article asserting that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the ECJ (European Court of Justice), and that "while further work is needed, a middle ground is clearly emerging". This followed a Reuters report earlier in the week that EU trade negotiator Barnier believes UK PM Johnson wants a deal, according to unnamed sources who attended a closed-door briefing he gave to national envoys of the EU 27. This is despite the UK government's often repeated assertion that it's willing to take the UK out of the single market at year-end without a new trade deal, if it doesn't get what it wants. The Reuters sources cited also said that the Irish and Dutch representatives were also upbeat about the chances of a deal being made (Ireland and the Netherlands being the two EU nations proportionately most exposed to UK trade). The final round of EU-UK trade talks before the summer break are taking place in London this week. The deadline for reaching a deal before the UK leaves the single market at year-end is October, and things aren't likely to get interesting until then. The pound still remains the weakest of the main currencies on the year-to-date, so there is scope for sustained gains if markets perceive the odds for a deal are improving. Uncertainties still remain, however, particularly how broad any deal would be.

              [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 settled near the 1.3350 mark, above Tuesday's seven-week low at 1.3329. Oil prices continued to ply a narrow range, consolidating off recent four-and-a-half-month highs, lacking directional impulse presently. 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.

              XE Currency Blog

              Topics7271 Posts7316
              By XE Market Analysis July 29, 2020 4:25 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5195
                XE Market Analysis: Europe - Jul 29, 2020

                The dollar is amid a second of trading steadily, consolidating the sharp declines seen over the prior 10 days. The narrow trade-weighted USD index has posted a 93.60-80 range so far today, holding within yesterday's range and above the 25-month low that was seen on Monday at 93.68. EUR-USD is showing modest gains, though has also remained with its Tuesday range and below the 22-month high see yesterday at 1.1782. Cable has settled in the lower 1.2300s, below the near five-month high seen Tuesday at 1.2953. AUD-USD whittled out a fresh high at 0.7179, but remained just off from the 15-month peak seen last week at 0.7183. USD-CAD settled near the 1.3450 mark, above Tuesday's seven-week low at 1.3329. USD-JPY remained heavy, but so far managing to hold just above yesterday's near five-month low at 104.93. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the dollar and New Zealand dollar, with just over a 2% advance versus both underperformers. The sputtering price action in global equity markets has driven safe haven demand into the yen, with the dollar evidently perceived to be no longer providing protection. Profit taking and position trimming has been a theme across markets over the last day into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is some uncertainty about outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections, alongside geopolitical tensions, have also been in the mix. Regarding the Fed, no policy changes are expected, though forex markets will be laser focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the dollar, further.

                [EUR, USD]
                EUR-USD is showing modest gains on the day, though has also remained within its Tuesday range and below the 22-month high see yesterday at 1.1782. The dollar is amid a second day of trading steadily, consolidating the sharp declines seen over the prior 10 days. Profit taking and position trimming have been a theme across markets over the last day into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is a degree of uncertainty about the outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections, alongside geopolitical tensions, have also been in the mix. Regarding the Fed, no policy changes are expected, though forex markets will be laser focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the dollar, further. The U.S. 10-year TIPS (inflation-protected security) hit a record low at -0.92% last week. As for the euro, the common currency had perhaps been due a correction after rallying strongly in the advent of the EU's 750 bln euro recovery fund. We see upside risk with regard to the dollar, which could sustain the correction in EUR-USD. We don't expect any changes from the Fed to the policy stance, QE, or forward guidance as we believe the framework review, expected last month, has been put off until the Fall, at least. We do still expect a very cautious stance from Chairman Powell given the retrenchment in reopening, spike in jobless claims, uncertainty over the new fiscal package and rise in geopolitical tensions, but there is a risk that markets will be left slightly underwhelmed. One positive for the U.S. is that the rate of new coronavirus cases appears to be stabilizing, falling by 2% last week, which fits the Gompertz curve of respiratory virus outbreaks (which has been studiously ignored by most media).

                [USD, JPY]
                USD-JPY remained heavy, but so far managing to hold just above yesterday's near five-month low at 104.93. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the dollar and New Zealand dollar, with just over a 2% advance versus both underperformers. The sputtering price action in global equity markets has driven safe haven demand into the yen, with the dollar evidently perceived to be no longer providing protection. Profit taking and position trimming has been a theme across markets over the last day into the Fed's policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is a degree of uncertainty about outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections have also been in the mix. The yen 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 settled in the lower 1.2300s, below the near five-month high seen Tuesday at 1.2953. The pounded lifted against most currencies yesterday, inspired by an FT article asserting that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the ECJ (European Court of Justice), and that "while further work is needed, a middle ground is clearly emerging". This followed a Reuters report earlier in the week that EU trade negotiator Barnier believes UK PM Johnson wants a deal, according to unnamed sources who attended a closed-door briefing he gave to national envoys of the EU 27. This is despite the UK government's often repeated assertion that it's willing to take the UK out of the single market at year-end without a new trade deal, if it doesn't get what it wants. The Reuters sources cited also said that the Irish and Dutch representatives were also upbeat about the chances of a deal being made (Ireland and the Netherlands being the two EU nations proportionately most exposed to UK trade). The final round of EU-UK trade talks before the summer break are taking place in London this week. The deadline for reaching a deal before the UK leaves the single market at year-end is October, and things aren't likely to get interesting until then. The pound still remains the weakest of the main currencies on the year-to-date, so there is scope for sustained gains if markets perceive the odds for a deal are improving. Uncertainties still remain, however, particularly how broad any deal would be.

                [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 settled near the 1.3450 mark, above Tuesday's seven-week low at 1.3329. Oil prices continued to ply a narrow range, consolidating off recent four-and-a-half-month highs, lacking directional impulse presently. 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.

                XE Currency Blog

                Topics7271 Posts7316
                By XE Market Analysis July 28, 2020 12:54 pm
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5195
                  XE Market Analysis: Asia - Jul 28, 2020

                  The Dollar stemmed its recent bleeding in N.Y. on Tuesday, though gains overall were modest. The DXY managed to hold above the two-year low seen Monday, bottoming at 93.50 before bouncing to 94.01 into the open. Incoming data was mixed, with June consumer confidence weaker than expected, and the July Richmond Fed index posting a slightly better outcome. Wall Street and yields were lower. Ongoing uncertainty on the progress on the U.S. stimulus bill was a drag on risk taking sentiment. EUR-USD chopped around 1.1701 and 1.1743, ending near its highs. USD-JPY eased from 105.38 highs to 1044.96, while USD-CAD ranged between 1.3407 and 1.3359. Cable hit 4-plus month highs of 1.2946, up from 1.2860 at the open.

                  [EUR, USD]
                  EUR-USD stayed under Monday's trend high of 1.1782, peaking in early N.Y. at 1.1743, before chopping between 1.1701 and 1.1743 through the remainder of the session. The modest USD correction was driven by a broad rebound in the dollar, which finally found its feet after a seven straight day run lower. A profit-taking drop from a new nominal record high in gold prices lent the dollar support. There has been a some impetus to cover dollar shorts into the Fed's two-day FOMC, withe announcement and press conference coming on Wednesday, and Friday's deadline for Congress to extend pandemic-era jobless benefits.

                  [USD, JPY]
                  USD-JPY fell from overnight highs of 105.68 to morning N.Y. lows of 105.05, marking a new better than four-month base in the process. The JPY picked up a safe haven bid during the London morning as stocks headed lower in Europe, alongside U.S. equity index futures. After the U.S. consumer confidence miss, USD-JPY printed its low of 104.96. With the Dollar having lost its safe haven appeal of late, given the uncertain U.S. economic outlook due to the virus, USD-JPY would appear to have further downside potential should risk-off continue.

                  [GBP, USD]
                  Cable printed a fresh trend high at 1.2946, a level last seen in early March. The gains were inspired by an FT article asserting that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the European Court of Justice, and that "while further work is needed, a middle ground is clearly emerging". This followed a Reuters report that EU trade negotiator Barnier believes UK PM Johnson wants a deal, according to unnamed sources who attended a closed-door briefing he gave to national envoys of the EU 27. The Pound still remains the weakest of the main currencies on the year-to-date, so there is scope for sustained gains if markets perceive the odds for a deal are improving.

                  [USD, CHF]
                  EUR-CHF retreated to the mid-1.07s in N.Y. on Tuesday, after topping at 1.0841 on Monday, reflecting broad outperformance of the common currency 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 had fallen back over the last few weeks, though has continued 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. SNB policy, which stuck with negative rates for the foreseeable future and strengthened its commitment to intensify FX intervention if necessary to keep the CHF under control.

                  [USD, CAD]
                  USD-CAD rallied from six-week lows of 1.3329 seen in Asia, peaking at 1.3407 in early North American trade, later falling to 1.3359 lows. The USD has turned higher more broadly, in what appears to be Dollar short covering ahead of Wednesday's FOMC announcement. The DXY had fallen for six-straight sessions, as sentiment over the U.S. growth outlook had been dented due to spikes in COVID cases. Over that time frame, the index had fallen from 96.33 on July 17 to 93.48 on Monday.

                  XE Currency Blog

                  Topics7271 Posts7316
                  By XE Market Analysis July 27, 2020 2:53 pm
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5195
                    XE Market Analysis: Asia - Jul 27, 2020

                    The DXY fell to two-year lows of 93.48 in N.Y. on Monday, down from 94.40 highs seen in Asian hours. Incoming data has the June durables report, where order rose a better than consensus 7.3%. As has been the case of late, there was little if any market reaction. Wall Street made headway, led by the NASDAQ as the agreement between the White House and GOP lawmakers tempers the uncertainty over the ability to deliver another spending bill. The rising number of new virus infections and U.S.-China trade frictions remain a damper on risk appetite, but the now solid chance for another shot of fiscal stimulus before month-end lifted sentiment, at least for now. EUR-USD headed from near 1.1680 into the open, to 1.1782 highs. USD-JPY peaked at 105.49 early, later hitting lows of 105.12. USD-CAD hit a 1.3404 high, later bottoming under 1.3355. Cable made trend highs of 1.2902, climbing from early lows of 1.2842.

                    [EUR, USD]
                    EUR-USD printed 23-month highs of 1.1782 printing seven-consecutive sessions of higher daily highs and lows. The combination of Euro strength following the agreement on the EU coronavirus relief fund, and USD weakness, as COVID continues to spread in the U.S. have been the drivers of EUR-USD gains. A Reuters survey last week highlighted increasing pessimism about the nearer-term U.S. outlook given the extent of localized lockdown measures in response to the spike in coronavirus cases across many southern and western states. Downside risks for EUR-USD include less dovish than expected Fed guidance this Wednesday, when the FOMC policy announcement is due.

                    [USD, JPY]
                    USD-JPY hit new four-month lows of 105.12, down from 106.06 Asian highs. The Dollar overall has been getting slammed of late, seeing the DXY fall to two-year lows. The move lower has come as the USD has largely given up its safe-haven role, as investors come to the realization that as a result of spiking COVID cases, economic recovery in the U.S. will likely not come in the form of a V. The next support level comes at the March 13 low of 104.50.

                    [GBP, USD]
                    Cable posted a near five-month peak at 1.2902 on the back of dollar weakness. The pound's laggard performance comes amid increasing signs that the EU and UK are only likely to strike a narrow trade deal, with the risk remaining that the UK might even leave the single market at year-end without a deal. The final round of EU-UK trade talks before the summer break will take place this week in London. Last week's round in Brussels ended without breakthrough, with both sides reporting that major differences remain on key issues, particularly level playing field rules and fisheries. The UK calendar this week is relatively quiet, highlighted by latest CBI distributive sales report (Tuesday), June lending and money support figures from the BoE (Wednesday), and the July GFK consumer sentiment survey (Friday).

                    [USD, CHF]
                    EUR-CHF rallied to better than one-month highs of 1.0839 in N.Y. on Monday, reflecting broad outperformance of the common currency 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 had fallen back over the last few weeks, though has continued 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. SNB policy, which stuck with negative rates for the foreseeable future and strengthened its commitment to intensify FX intervention if necessary to keep the CHF under control.

                    [USD, CAD]
                    USD-CAD remained above last week's one-plus month low of 1.3349, trading under 1.3355 lows during the North American afternoon session. The pairing bottomed at 1.3369 into the open, after peaking at 1.3431 in early Asian dealings. Broad USD weakness limited upside for USD-CAD, as the uncertain U.S. economic outlook has seen the Greenback's safe-haven status erode, while WTI crude prices bounced over $41.80 also put a cap on the pairing.

                    XE Currency Blog

                    Topics7271 Posts7316
                    By XE Market Analysis July 27, 2020 7:23 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5195
                      XE Market Analysis: North America - Jul 27, 2020

                      The dollar continued to decline, printing fresh trend highs against the euro and other currencies. The narrow trade-weighted USD index (DXY) fell over 0.5% to a 22-month low at 93.76 in what is now the seventh consecutive day of decline and the fourth straight week the index has surpassed its prior-week low. Momentum has also been accelerating to the downside over the last week. EUR-USD concurrently printed its loftiest level seen since January 2018 at 1.1731. USD-JPY fell by 0.8% in pegging a four-month low at 105.25. AUD-USD and NZD-USD lifted by around 0.5% a piece, though both pairs remained off recent trend highs. USD-CAD ebbed moderately, drawing in on last Thursday's seven-week low at 1.3349. Front-month WTI crude prices are softer, but have so far remained within the range seen on Friday. Cable posted a near five-month peak at 1.2875, despite losing ground to the euro, yen and Australian dollar, among other currencies. The pound's laggard performance comes amid increasing signs that the EU and UK are only likely to strike a narrow trade deal, with the risk remaining that the UK might even leave the single market at year-end without a deal. As for the dollar, the currency appears to be amid a down-weighting phase in portfolios on 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), along with expectations for dovish guidance from the Fed at this week's FOMC. There has been some speculation that the U.S. central bank is considering yield curve targetting (which we don't anticipate anytime soon). Global stock markets continue to exhibit a flagging price action, being richly valued and as the pace of global economic recovery is flattening out somewhat, along with U.S.-China tensions rising from simmering to bubbling. Gold prices hit new highs above $1,900, reflecting investor concerns that the massive stimulus measures around the world will lead to an inflation spike.

                      [EUR, USD]
                      EUR-USD has printed its loftiest level seen since January 2018 at 1.1724, which was seen ahead of the London open today. The pair has since remained buoyant, near the 1.1700 mark. The new high was largely a reflection of broad dollar weakness, with most euro crosses putting in a steady performance. The narrow trade-weighted USD index (DXY) fell over 0.5% to a 22-month low at 93.84 in what is now the seventh consecutive day of decline and the fourth straight week the index has surpassed its prior week low. Momentum has also been accelerating to the downside over the last week, concomitant with accelerating upside momentum in EUR-USD. The U.S. currency appears to be undergoing a down-weighting in portfolios on 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). There are also expectations for dovish guidance from the Fed at this week's FOMC, including some speculation that the U.S. central bank is considering yield curve targetting, although we don't anticipate this anytime soon. A Reuters survey last week highlighted increasing pessimism about the nearer-term U.S. outlook given the extent of localized lockdown measures in response to the spike in coronavirus cases across many southern and western states. Downside risks for EUR-USD include less dovish than expected Fed guidance this week, and any sustained rekindling in risk aversion in global markets, which would likely generate safe haven demand for dollars.

                      [USD, JPY]
                      USD-JPY fell by over 0.6% in pegging a four-month low at 105.39. Yen crosses have so far been comparatively steady, with the USD-JPY decline having been driven by a broad rotation low in the dollar. The yen 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]
                      The pound has been trading mixed so far today, posting a near five-month high at 1.2858 against the underperforming dollar, but losing about 0.3% against the euro, yen and Australian dollar, among other currencies. The UK currency's laggard performance comes amid increasing signs that the EU and UK are only likely to strike a narrow trade deal, with the risk remaining that the UK might even leave the single market at year-end without a deal. The final round of EU-UK trade talks before the summer break will take place this week in London. Last week's round in Brussels ended without breakthrough, with both sides reporting that major differences remain on key issues, particularly level playing field rules and fisheries -- hardly a surprise to anyone keeping tabs on this issue. Each side has been doubling down in accusing the other of not being amenable to compromise. The deadline for reaching a deal before the UK leaves the single market at year-end is October (to allow time for political ratifications and a myriad of technical issues to be completed), and things aren't likely to get interesting until then. More posturing can be expected in the meantime. The UK calendar this week is relatively quiet, highlighted by latest CBI distributive sales report (Tuesday), June lending and money support figures from the BoE (Wednesday), and the July GFK consumer sentiment survey (Friday). The data should show a continued pick-up in activity as reopening broadens. There has been a mini boom in the residential housing market, as pent-up demand is unleashed with reopening, which should be reflected by a jump in mortgage lending in the BoE data.

                      [USD, CHF]
                      EUR-CHF has recently lifted from levels near 1.0600 to levels above 1.0750, benefiting from broader euro gains as markets anticipated EU leaders green-lighting the proposed EUR 750 bln EU recovery fund. This has helped the cross to continue 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, when the consequences of the pandemic had increased bets about a possible breakup of the euro area, and even the EU. However, since the Franco-German backed EU recovery fund gained traction in mid May, these bets have gone sour, leading to a rebound in EUR-CHF. Further out, the Swiss economy will likely be better able to recover from the pandemic era than the eurozone economy. Along with Swtizerland's massive current account surplus, these are factors that suggest upside potential for EUR-CHF will be limited, regardless of the SNB's desire for a weaker currency. Regarding the SNB, the central bank left policy settings unchanged at its recent quarterly review, reaffirming that aggressive intervention will remain the main tool to fight the impact of the coronavirus pandemic on the franc. SNB chief Jordan stressed that the currency remains "highly valued" and repeated that the central bank will continue to sell it as needed. The SNB is now forecasting a contraction in economic activity of 6% this year, the most severe recession since the 1970. The SNB also trimmed inflation forecasts, though it is pretty clear that policymakers are reluctant to go below the current level of -0.75% for the key policy rate. Negative for longer remains Swiss policymakers' central policy guidance.

                      [USD, CAD]
                      USD-CAD is moderately today, drawing in on last Thursday's seven-week low at 1.3349. Front-month WTI crude prices are softer, but have so far remained within the range seen on Friday. The Canadian dollar will likely remain hostage to fluctuations in oil prices. Concerns about the impact of localized lockdown measures in the U.S. and the marked deterioration in U.S. and Western relations with China are currently capping oil prices and other asset markets. This has offset global stimulus in terms of sentiment and positive trial results in several of the leading coronavirus vaccine candidates. 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.

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