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By XE Market Analysis May 15, 2020 7:38 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5061
    XE Market Analysis: North America - May 15, 2020

    The dollar took a moderate rotation lower as stock markets in Europe rallied. The narrow trade-weighted USD index dipped from levels near 100.40 to a low at 110.18, which is 3 pips shy of yesterday's low. EUR-USD concurrently pushed to a 1.0820 high, up from a low at 1.0793. News, breaking just ahead of the New York interbank market, was shaking things up and sparking a sharp drop in S&P 500 futures, which went from overnight gains of around 0.3% to a 0.5%-plus loss in short order. Reuters reported that the U.S. Commerce Department is to amend an export rule to "strategically target Huawei's acquisition of semiconductors that are the direct product of certain U.S. software and technology," marking an escalation in U.S.-China tensions. The Commerce Department said that the "announcement cuts off Huawei's efforts to undermine U.S. export controls." Expectedly dismal GDP data out of Germany and the Eurozone, meanwhile, had little impact. Elsewhere, USD-CAD ebbed to a two-day low at 1.4016 as the Canadian dollar and other oil-correlating currencies broke free of the commodity-currency pack by posting gains. This came with June WTI prices scaling to a five-week high at $28.75 after Saudi Arabia cut sales to key buyers, and with the IEA highlighting that demand is improving. USD-JPY edged out a three-day peak at 107.43 before ebbing back below the day's open in printing a low at 107.01. AUD-JPY, a forex market barometer of global investor risk appetite in markets, and a liquid currency proxy of China, also turned lower after rising earlier in the Asia-Pacific session. Data out of China were mixed, with production rebounding while retail sales remaining under pressure.

    [EUR, USD]
    EUR-USD lifted to a 1.0820 high, up from a low at 1.0793 on the back of a shift lower in the dollar. Expectedly dismal GDP data out of Germany and the Eurozone had little impact. The conflict between Germany's constitutional court and the ECB remains unresolved and could escalate further if the central bank continues to stretch the limits of its mandate in the quest to keep spreads in and prevent Italian yields in particular from rising. EUR-USD continues to trade in a broad consolidation range to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pari to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone, along with the dollar's status as a safe haven in the pandemic crisis era, tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

    [USD, JPY]
    USD-JPY edged out a three-day peak at 107.43 before ebbing back below the day's open in printing a low at 107.01. AUD-JPY, a forex market barometer of global investor risk appetite in markets, and a liquid currency proxy of China, also turned lower after rising earlier in the Asia-Pacific session. The yen's ebb-and-rebound tracked a rise and fall back in equity markets. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

    [GBP, USD]
    Cable lifted above 1.2200, putting in a base after posting a five-week yesterday at 1.2165. Yesterday had marked the fourth consecutive day of decline, and the eighth down down out of the last 10 trading days. Sterling had also been trading heavily against the euro, and other currencies, this week reaching a six-week low against the common currency, before rebounding some. The downward trajectory approximated a decline in global stocks, to which the UK currency has developed a quite close correlation with during the pandemic crisis era so far. The UK's high infection rate of the coronavirus, and high death total, has meant the country is behind the pack in terms of reopening its economy. This, along with the UK's open economy and high current account deficit (which undermines the currency in a global crisis) -- and, not to forget, the continued risk of the UK leaving at year-end the post-Brexit transition membership arrangement of the EU's single market -- has elevated the pound as a favoured major-currency short recommendation. BoE policy expectations also get a mention in many bearish narratives, with the central bank widely anticipated to expand its QE program at its June policy meeting. A more speculative view is that the BoE will also be considering going negative with its policy interest rate (this is also an option for the Fed, of course). The UK government's extension of its job retention scheme, through to October, while more generous than many other countries, is projected to cost a massive GBP 12 bln per month, which is also raising concerns. Overall, given this backdrop, and the dollar's safe-haven status, there is a risk of Cable revisiting sub-1.2000 levels.

    [USD, CHF]
    The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

    [USD, CAD]
    USD-CAD ebbed to a two-day low at 1.4030, as the Canadian dollar and other oil-correlating currencies broke free of the commodity-currency pack by posting gains. This came with June WTI prices scaling to a six-week high at $28.75 after Saudi Arabia cut sales to key buyers, and with the IEA highlighting that demand is improving. While oil prices are up by over 280% from the April-28th low, crude prices are still down by over 56% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

    XE Currency Blog

    Topics7137 Posts7182
    By XE Market Analysis May 15, 2020 4:07 am
      XE Market Analysis's picture
      XE Market Analysis Posts: 5061
      XE Market Analysis: Europe - May 15, 2020

      The dollar has settled off its Thursday highs and most commodity currencies softened after rising during the New York afternoon session yesterday, gains which had been concurrent with a rebound on Wall Street. Asian stock markets followed U.S. markets higher, but gains were pared and Chinese and some other markets turned negative amid persisting concerns about souring U.S.-China relations and the risk of second-wave coronavirus outbreaks as economies reopen. Data out of China were mixed, with production rebounding while retail sales remaining under pressure. Chinese production figures are normally considered a bellwether data release, both for the Asia-Pacific region and the globe, though the scope for a enduring recovery in activity looks to be limited with many world economies remaining in a state of semi-lockdown. Among the main currencies, the narrow trade-weighted USD index (DXY) settled in a narrow range marked by 100.26-36, below yesterday's three-week high at 100.55. EUR-USD concurrently held near 1.0800, above the eight-day low printed yesterday at 1.0775. Cable dipped back under 1.2200 but remained above the five-week low seen yesterday at 1.2165. USD-JPY edged out a three-day peak at 107.43 before ebbing back below the day's open in printing a low at 107.14. AUD-USD clocked a two-day high at 0.6474 before turning back under 0.6450, with the pairing continuing a heavy price action after four consecutive days of decline. USD-CAD ebbed to a two-day low at 1.4030, as the Canadian dollar and other oil-correlating currencies broke free of the commodity-currency pack by posting gains. This came with June WTI prices scaling to a five-week high at $28.52 after Saudi Arabia cut sales to key buyers, and with the IEA highlighting that demand is improving. Ahead today, another batch of economic data are due out of Europe, where Q1 GDP highlights, and the U.S., where retail sales and production highlight, though markets are more focused on the scope and success of economic reopenings than backward-looking data.

      [EUR, USD]
      EUR-USD has been holding near 1.0800 so far today, above the eight-day low printed yesterday at 1.0775. Ahead today, another batch of economic data are due out of Europe, where Q1 GDP highlights, and the U.S., where retail sales and production highlight, though markets are more focused on the scope and success of economic reopenings than backward-looking data. EUR-USD is trading to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone, along with the dollar's status as a safe haven in the pandemic crisis era, tips the balance toward downside risk. The conflict between Germany's constitutional court and the ECB remains unresolved and could escalate further if the central bank continues to stretch the limits of its mandate in the quest to keep spreads in and prevent Italian yields in particular from rising. Overall, there is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

      [USD, JPY]
      USD-JPY edged out a three-day peak at 107.43 before ebbing back below the day's open in printing a low at 107.14. AUD-JPY, a forex market barometer of global investor risk appetite in markets, and a liquid currency proxy of China, also turned lower after rising earlier in the Asia-Pacific session. The yen's ebb-and-rebound tracked a rise and fall back in equity markets. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

      [GBP, USD]
      Cable dipped back under 1.2200 but remained above the five-week low seen yesterday at 1.2165. Yesterday marked the fourth consecutive day of decline, and the eighth down down out of the last 10 trading days. Sterling has also been trading heavily against the euro, and other currencies, this week reaching a six-week low against the common currency. The downward trajectory has approximated a decline in global stocks, to which the UK currency has developed a quite close correlation with during the pandemic crisis era so far. The UK's high infection rate of the coronavirus, and high death total, has meant the country is behind the pack in terms of reopening its economy. This, along with the UK's open economy and high current account deficit (which undermines the currency in a global crisis) -- and, not to forget, the continued risk of the UK leaving at year-end the post-Brexit transition membership arrangement of the EU's single market -- has elevated the pound as a favoured major-currency short recommendation. BoE policy expectations also get a mention in many bearish narratives, with the central bank widely anticipated to expand its QE program at its June policy meeting. A more speculative view is that the BoE will also be considering going negative with its policy interest rate (this is also an option for the Fed, of course). The UK government's extension of its job retention scheme, through to October, while more generous than many other countries, is projected to cost a massive GBP 12 bln per month, which is also raising concerns. Overall, given this backdrop, and the dollar's safe-haven status, there is a risk of Cable revisiting sub-1.2000 levels.

      [USD, CHF]
      The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

      [USD, CAD]
      USD-CAD ebbed to a two-day low at 1.4030, as the Canadian dollar and other oil-correlating currencies broke free of the commodity-currency pack by posting gains. This came with June WTI prices scaling to a five-week high at $28.52 after Saudi Arabia cut sales to key buyers, and with the IEA highlighting that demand is improving. While oil prices are up by over 280% from the April-28th low, crude prices are still down by over 56% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

      XE Currency Blog

      Topics7137 Posts7182
      By XE Market Analysis May 14, 2020 2:37 pm
        XE Market Analysis's picture
        XE Market Analysis Posts: 5061
        XE Market Analysis: Asia - May 14, 2020

        The Dollar faded lower in morning trade on Thursday, later perking back up in another relatively quiet FX session. The USD shrugged off the higher than forecast jobless claims, and deflationary trade prices, though Wall Street took a dive, before later turning higher. EUR-USD topped at 1.0816 before easing to 1.0780 lows. USD-JPY found a floor at 106.86, later peaking over 107.20. USD-CAD was pushed and pulled by wide swings in oil prices, ultimately dropping under 1.4070 from highs over 1.4140. Cable hit a one-month low of 1.2166, subsequently bouncing over 1.2215.

        [EUR, USD]
        EUR-USD bottomed at one-week lows of 1.0775 in early N.Y. trade, later rising to 1.0816 in light trade. Economic fundamentals remain bleak on both sides of the Atlantic, with markets continuing to look through the data. Big picture, the pairing remains inside of recent trading ranges, and until a clearer view of the re-opening of economies becomes evident, more of the same is anticipated. The 20-day moving average at 1.0847 is resistance, with support at the May 7 low of 1.0767.

        [USD, JPY]
        USD-JPY hit N.Y. session lows of 106.86, down from pre-open highs of 107.10. Risk-off conditions, as evidenced by sharply lower equities, and lower Treasury yields weighed on the pairing early on. Fed chair Powell's "significant downside risks" comment on Wednesday carried forward to Thursday, while the higher than expected jobless claims underscored the impact the pandemic is having on the economy. Later, as risk aversion faded, USD-JPY traded back over 107.20. USD-JPY support is at Wednesday's 106.75 low.

        [GBP, USD]
        Cable printed 1.2166 lows in early N.Y. trade, levels last seen on April 7. The downward trajectory has approximated a decline in global stocks, to which the UK currency has developed a quite close correlation with during the pandemic crisis era so far. The UK's high infection rate of the coronavirus, and high death total, has meant the country is behind the pack in terms of reopening its economy. The UK government's extension of the job retention scheme, through to October, while more generous than many other countries, is projected to cost a massive GBP 12 bln per month, which is also raising concerns. Overall, given this backdrop, and the dollar's safe-haven status, there is a risk of Cable revisiting sub-1.2000 levels.

        [USD, CHF]
        EUR-CHF was held to narrow ranges in the low 1.05s on Thursday. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

        [USD, CAD]
        USD-CAD rallied to one-week highs of 1.4141, up from pre-open lows of 1.4069. The better than $1/bbl drop in oil prices supported, with WTI crude basing at $25.69 in early trade. Ugly Canada manufacturing data supported as well. General USD strength underpinned the pairing, with safe-haven flows into the greenback noted in morning trade, as risk-off conditions prevailed. Later, as oil prices moved higher, USD-CAD pulled back under 1.4070. The May 7 high of 1.4173 is the next upside target, with support at the 50-day moving average at 1.4061.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis May 14, 2020 7:06 am
          XE Market Analysis's picture
          XE Market Analysis Posts: 5061
          XE Market Analysis: North America - May 14, 2020

          The dollar and yen have picked up safe haven demand as Wall Street once again led a rotation lower in global equity markets. The narrow trade-weighted USD index printed a two-day high at 100.41, while EUR-USD concurrently edged out a two-day low at 1.0790. Yen outperformance weighed on USD-JPY, driving the pair below 107.00 and to a low so far at 106.78, which is 4 pips shy of yesterday's low. EUR-JPY posted a three-day low at 115.36. The biggest decliners have been the commodity currencies. AUD-USD, now amid a fourth consecutive day of decline, fell to a one-week low at 0.6421. An even worse than expected Australian employment report added pressure to the antipodean currencies. Employment in Australian dove 594.3K in April. Amid the ensuing risk-off theme, the governors of the BoJ and RBNZ re-emphasized their "do what it takes" mantra, which followed Fed chair Powell's grim warning of an "extended period" of weak economic growth, citing concerns about how long it take for a vaccine to be ready and widely available, and how well future outbreaks of the virus could be contained. Equity market narratives are becoming much more circumspect about the outlook, with few now talking-up prospects for a V-shaped recovery. Goldman Sachs research, for instance, highlighted that investors have been dismissing bank loan losses totalling, in the U.S., $103 bln over the next four quarters, along with domestic and global political uncertainty. It's also becoming clear that the phased reopening of economies doesn't mean there will be a full reopening of economies anytime soon, and even if there was, the behavioural adjustment of consumers is significant. The S&P 500, which had rallied by more than 30% in just over a month, is now down by over 4% since late April.

          [EUR, USD]
          EUR-USD has been entrenched in a narrow range near 1.0850, holding below yesterday's eight-day high at 1.0885. The high was a product of dollar weakness. Amid concerns about a second wave of coronavirus infections as economies reopen, and with disinflationary pressures taking a grip, and U.S. money markets pricing in the negative interest rates, the pressure is mounting on the Fed, which has been weighing on the dollar. The spotlight is now on today's speech by Fed chair Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. His colleague Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed. EUR-USD is trading to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies.

          [USD, JPY]
          The yen picked up safe-haven demand amid a backdrop of tumbling global stock markets. USD-JPY fell below 107.00 in making a low so far at 106.81. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies. Markets are concerned about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections this week, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again. The combo of trade and geopolitical tensions, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

          [GBP, USD]
          The pound has come under pressure against the safe haven dollar and yen, and also the euro and other currencies. The uncertain tone in global equity markets has translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era to far. Cable printed a 37-day low at 1.2182, which has swung the early-April low at 1.2164 into scope. That low marks the nadir of the range that's been prevailing since early April, which in turn marks a consolidation of the gains seen out of the 35-year low at 1.1409 that was seen in mid March. Despite the high infection rate and death total in the UK, the country this week has initiated a baby-step toward reopening its economy this week, with non-essential manufacturing reopening. The UK and EU are, meanwhile, amid the next round of trade talks. The British government has continued to insist that there will be no delay in the UK's end-of-year departure from its Brexit transition membership of the EU's customs union and single market. The UK has until July 1st to commit to this, so the pressure is on negotiators. Markets will continue to factor in a risk that the UK leaves the EU at the end of the year without a new trade deal, as many analysts see there is insufficient time to negotiate a new deal, even though the two sides are starting from perfect equivalence. Leaving the single market (which includes 40 free trade deals with global economies) without a new trade deal in place would mean a large portion of the UK's trade would switch to much less favourable WTO terms and conditions.

          [USD, CHF]
          The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

          [USD, CAD]
          USD-CAD has settled just off the one-week high that was seen yesterday at 1.4116. The high was seen as oil prices posted one-month highs, which had weighted on the Canadian dollar. June WTI crude prices printed a high at $26.45, and have since been consolidating at moderately softer levels. While oil prices are up by over 250% from the April-28th low, crude prices are still down by over 60% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis May 14, 2020 4:06 am
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: Europe - May 14, 2020

            The dollar and yen have picked up safe haven demand as Wall Street once again led a rotation lower in global equity markets. The narrow trade-weighted USD index printed a two-day high at 100.34, while EUR-USD concurrently edged out a two-day low at 1.0802. Yen outperformance weighed on USD-JPY, driving the pair below 107.00 and to a low so far at 106.78, which is 4 pips shy of yesterday's low. EUR-JPY posted a three-day low at 115.36. The biggest decliners have been the commodity currencies, along with many developing-world currencies. AUD-USD, now amid a fourth consecutive day of decline, fell to a one-week low at 0.6421. An even worse than expected Australian employment report added pressure to the antipodean currencies. Employment in Australian dove 594.3K in April. Amid the ensuing risk-off theme, the governors of the BoJ and RBNZ re-emphasized their "do what it takes" mantra. Fed chair Powell yesterday warned of an "extended period" of weak economic growth, citing concerns about how long it take for a vaccine to be ready and widely available, and how well future outbreaks of the virus could be contained. Equity market narratives are becoming much more circumspect about the outlook, with few now talking-up prospects for a V-shaped recovery. Goldman Sachs research, for instance, highlighted that investors have been dismissing bank loan losses totalling, in the U.S., $103 bln over the next four quarters, along with domestic and global political uncertainty. It's also becoming clear that the phased reopening of economies doesn't mean there will be a full reopening of economies anytime soon, and even if there was, the behavioural adjustment of consumers is significant. The S&P 500, which had rallied by more than 30% in just over a month, is now down by over 4% since late April.

            [EUR, USD]
            EUR-USD edged out a two-day low at 1.0802, driven by dollar firmness amid a bout of risk-off positioning in global markets. EUR-USD is trading to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

            [USD, JPY]
            The yen picked up safe-haven demand amid a backdrop of tumbling global stock markets. USD-JPY fell below 107.00 in making a low so far at 106.81. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies. Markets are concerned about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections this week, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again. The combo of trade and geopolitical tensions, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

            [GBP, USD]
            The pound has come under pressure against the safe haven dollar and yen, and also the euro and other currencies. The uncertain tone in global equity markets has translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era to far. Cable printed a 37-day low at 1.2182, which has swung the early-April low at 1.2164 into scope. That low marks the nadir of the range that's been prevailing since early April, which in turn marks a consolidation of the gains seen out of the 35-year low at 1.1409 that was seen in mid March. Despite the high infection rate and death total in the UK, the country this week has initiated a baby-step toward reopening its economy this week, with non-essential manufacturing reopening. The UK and EU are, meanwhile, amid the next round of trade talks. The British government has continued to insist that there will be no delay in the UK's end-of-year departure from its Brexit transition membership of the EU's customs union and single market. The UK has until July 1st to commit to this, so the pressure is on negotiators. Markets will continue to factor in a risk that the UK leaves the EU at the end of the year without a new trade deal, as many analysts see there is insufficient time to negotiate a new deal, even though the two sides are starting from perfect equivalence. Leaving the single market (which includes 40 free trade deals with global economies) without a new trade deal in place would mean a large portion of the UK's trade would switch to much less favourable WTO terms and conditions.

            [USD, CHF]
            The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

            [USD, CAD]
            USD-CAD has settled just off the one-week high that was seen yesterday at 1.4116. The high was seen as oil prices posted one-month highs, which had weighted on the Canadian dollar. June WTI crude prices printed a high at $26.45, and have since been consolidating at moderately softer levels. While oil prices are up by over 250% from the April-28th low, crude prices are still down by over 60% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis May 13, 2020 2:36 pm
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: Asia - May 13, 2020

              The dollar was mostly higher in N.Y. on Wednesday, gaining ground on safe-haven flows following Fed chair Powell's downbeat economic outlook in the face of the pandemic. In addition, Powell down played the prospects of negative interest rates, which was supportive of the USD. Incoming PPI was much cooler than expected, though had little impact on the market. EUR-USD faded from highs over 1.0890 to 1.0812 lows. USD-JPY ranged between 106.74 and 107.15, while USD-CAD topped over 1.4100 from from 1.4006 lows. GBP-USD printed a one-month low of 1.2210. Thursday brings weekly jobless claims, which are expected to rise another 2.50 mln versus the 3.169 mln the previous week. April trade prices are due as well.

              [EUR, USD]
              EUR-USD faded from early highs of 1.0896, easing into 1.0830 lows into the London close, and later to a base of 1.0812. As was the case on Tuesday, sellers emerged ahead of the 1.0900 level, which is regarded as a psych resistance point. Big picture, the pairing remains inside of recent trading ranges, and until a clearer picture of the re-opening of economies becomes evident, more of the same is anticipated. Support is at Tuesday's low of 1.0785.

              [USD, JPY]
              USD-JPY reclaimed the 107 handle, heading to 107.15 highs after touching 106.74 lows earlier in the session. The modest gains came after Fed chair Powell downplayed moving to negative interest rates. Trade has remained quiet and range bound overall, with USD-JPY well inside of the trading range seen this week. The 20-day moving average at 107.15 has capped gains for the time being.

              [GBP, USD]
              The Pound largely shrugged off the dismal UK data, with markets long-since desensitized to bad economic figures. UK preliminary Q1 GDP contracted 2.0% q/q while March industrial production contracted 4.2%. Cable edged out a one-month low at 1.2210. The bearish global equity markets has translated to Sterling weaknes, which has developed a quite strong positive correlation with stock market direction during the pandemic era to far.

              [USD, CHF]
              EUR-CHF was held to narrow ranges in the low 1.05s on Wednesday. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

              [USD, CAD]
              USD-CAD was range bound in the session, stuck between 1.4006 st the open, and 1.4060 highs. The pairing wass later on the rise, as WTI crude prices pull back to near $25.10 from post-inventory highs of $26.44. The pairing eventually topped at 1.4105. In addition, the USD has found some support following comments from Fed chair Powell, who, along with some of his colleagues on Tuesday, downplays the chances for negative interest rates in the U.S. The 50-day moving average at 1.4045 is marked as the next support level.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis May 13, 2020 7:05 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: North America - May 13, 2020

                The dollar has remained heavy, although having lifted out of its lows yesterday. Amid concerns about a second wave of coronavirus infections as economies reopen, and with disinflationary pressures taking a grip, and U.S. money markets going some way to pricing in negative interest rates, the pressure is mounting on the Fed, which has been weighing on the dollar. USD-JPY has edged out a two-day low at 106.97, extending the correction from the 20-day high that was seen on Monday at 107.78. EUR-USD has been entrenched in a narrow range near 1.0850, holding below yesterday's eight-day high at 1.0885. Most commodity currencies have been stable today after coming under pressure yesterday, although the New Zealand dollar has been an exception, dropping sharply after the RBNZ nearly doubled its QE program today. NZD-USD dropped to six-day lows in testing the 0.6000 level. Stock markets have been mixed, dropping in Europe after most Asia-Pacific markets managed to pare early losses. S&P 500 futures managed to lift out of the red, and were showing a 0.5% gain heading into the Wall Street open. AUD-USD has been settled in the mid-to-upper 0.6400s, holding above yesterday's six-day low at 0.6431. USD-CAD edged out a six-day high at 1.4085, driven by moderate underperformance in the Canadian dollar, which has come with oil prices turning softer after seeing one-month highs yesterday. Market attention is now on today's speech by Fed chair Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. His colleague Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed.

                [EUR, USD]
                EUR-USD has been entrenched in a narrow range near 1.0850, holding below yesterday's eight-day high at 1.0885. The high was a product of dollar weakness. Amid concerns about a second wave of coronavirus infections as economies reopen, and with disinflationary pressures taking a grip, and U.S. money markets pricing in the negative interest rates, the pressure is mounting on the Fed, which has been weighing on the dollar. The spotlight is now on today's speech by Fed chair Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. His colleague Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed. EUR-USD is trading to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies.

                [USD, JPY]
                USD-JPY edged out a two-day low at 106.97, extending the correction from the 20-day high that was seen on Monday at 107.78. The yen was bid during the late New York session, while the dollar had also come under pressure, setting up USD-JPY's new low today, though ranges in forex markets have been quite narrow so far today. Concerns about a second wave of coronavirus infections as economies reopen have given the safe haven Japanese currency an underpinning, while speculation that the Fed may be forced into adopting a negative interest rate policy framework has been weighing on the dollar a little. Market attention is now on today's speech by Fed chairman Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. Fed's Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies. Markets are concerned about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections this week, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again. The combo of trade and geopolitical tensions, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

                [GBP, USD]
                The pound has been unaffected by dismal UK data, with markets long-since desensitized to bad economic figures, which, as the UK finance minster Sunak put it, "are not a surprise," given the domestic and global lockdowns. UK preliminary Q1 GDP contracted 2.0% q/q while March industrial production contracted 4.2%. Sterling had been trading heavily into the data release, and has remained heavy since. Cable edged out a three-week low at 1.2251, with the UK currency concurrently printing a three-week low against the euro. The uncertain tone in global equity markets has translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era to far. At prevailing levels Cable is in the lower reaches of the range that's been prevailing since early April, which in turn marks a consolidation of the gains seen out of the 35-year low at 1.1409 that was seen in mid March. Despite the high infection rate and death total in the UK, the country this week has initiated a baby-step toward reopening its economy this week, with non-essential manufacturing reopening. The UK and EU are, meanwhile, amid the next round of trade talks. The British government has continued to insist that there will be no delay in the UK's end-of-year departure from its Brexit transition membership of the EU's customs union and single market. The UK has until July 1st to commit to this, so the pressure is on negotiators. Markets will continue to factor in a risk that the UK leaves the EU at the end of the year without a new trade deal, as many analysts see there is insufficient time to negotiate a new deal, even though the two sides are starting from perfect equivalence. Leaving the single market (which includes 40 free trade deals with global economies) without a new trade deal in place would mean a large portion of the UK's trade would switch to much less favourable WTO terms and conditions.

                [USD, CHF]
                The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

                [USD, CAD]
                USD-CAD edged out a six-day high at 1.4085, driven by moderate underperformance in the Canadian dollar, which has come with oil prices turning softer after seeing one-month highs yesterday. While oil prices are up by over 25% rebound from the April-28th low, crude prices are still down by over 60% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis May 13, 2020 3:35 am
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: Europe - May 13, 2020

                  The dollar has remained heavy, although having lifted out of its lows yesterday. Amid concerns about a second wave of coronavirus infections as economies reopen, and with disinflationary pressures taking a grip, and U.S. money markets pricing in the negative interest rates, the pressure is mounting on the Fed, which has been weighing on the dollar. USD-JPY has edged out a two-day low at 107.09, extending the correction from the 20-day high that was seen on Monday at 107.78. EUR-USD has been entrenched in a narrow range near 1.0850, holding below yesterday's eight-day high at 1.0885. Commodity currencies have been stable today after coming under pressure yesterday. Stock markets in the Asia-Pacific region started off negatively before paring losses during their afternoon sessions. S&P 500 futures managed to lift out of the red, and were showing a 0.3% gain as of the early London morning. AUD-USD has been settled in the mid-to-upper 0.6400s, holding above yesterday's six-day low at 0.6431. USD-CAD edged out a six-day high at 1.4085, driven by moderate underperformance in the Canadian dollar, which has come with oil prices turning softer after seeing one-month highs yesterday. Market attention is now on today's speech by Fed chair Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. His colleague Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed.

                  [EUR, USD]
                  EUR-USD has been entrenched in a narrow range near 1.0850, holding below yesterday's eight-day high at 1.0885. The high was a product of dollar weakness. Amid concerns about a second wave of coronavirus infections as economies reopen, and with disinflationary pressures taking a grip, and U.S. money markets pricing in the negative interest rates, the pressure is mounting on the Fed, which has been weighing on the dollar. The spotlight is now on today's speech by Fed chair Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. His colleague Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed. EUR-USD is trading to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies.

                  [USD, JPY]
                  USD-JPY edged out a two-day low at 107.09, extending the correction from the 20-day high that was seen on Monday at 107.78. The yen was bid during the late New York session, while the dollar had also come under pressure, setting up USD-JPY's new low today, though ranges in forex markets have been quite narrow so far today. Concerns about a second wave of coronavirus infections as economies reopen have given the safe haven Japanese currency an underpinning, while speculation that the Fed may be forced into adopting a negative interest rate policy framework has been weighing on the dollar a little. Market attention is now on today's speech by Fed chairman Powell (from 09:00 ET/13:00 GMT). We expect him to dismiss the view that rates will be eased below zero by the end of the year, a stance he's indicated several times of late. Fed's Bullard yesterday dismissed negative interest rates, arguing that an expansion in QE would be a better policy option, if needed. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies. Markets are concerned about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections this week, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again. The combo of trade and geopolitical tensions, and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

                  [GBP, USD]
                  Cable edged out a three-week low at 1.2255, while the pound concurrently printed a three-week low against the euro. The uncertain tone in global equity markets has translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era to far. At prevailing levels Cable is in the lower reaches of the range that's been prevailing since early April, which in turn marks a consolidation of the gains seen out of the 35-year low at 1.1409 that was seen in mid March. Despite the high infection rate and death total in the UK, the country this week has initiated a baby-step toward reopening its economy this week, with non-essential manufacturing reopening. The UK and EU, meanwhile, are amid the next round of trade talks. The British government has continued to insist that there will be no delay in the UK's end-of-year departure from its Brexit transition membership of the EU's customs union and single market. The UK has until July 1st to commit to this, so the pressure is on negotiators. Markets will continue to factor in a risk that the UK leaves the EU at the end of the year without a new trade deal, as many analysts see there is insufficient time to negotiate a new deal, even though the two sides are starting from perfect equivalence. Leaving the single market (which includes 40 free trade deals with global economies) without a new trade deal in place would mean a large portion of the UK's trade would switch to much less favourable WTO terms and conditions.

                  [USD, CHF]
                  The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

                  [USD, CAD]
                  USD-CAD edged out a six-day high at 1.4085, driven by moderate underperformance in the Canadian dollar, which has come with oil prices turning softer after seeing one-month highs yesterday. While oil prices are up by over 25% rebound from the April-28th low, crude prices are still down by over 60% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 9% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis May 12, 2020 3:04 pm
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5061
                    XE Market Analysis: Asia - May 12, 2020

                    The Dollar stumbled a bit early in the session on Tuesday, though later perked up some. For the most part, narrow trading ranges prevailed, as the FX market remains in consolidation mode, likely to continue until we get a better sense of how the unlocking of economies turns out. The markets overlooked the steeper core CPI decline. Wall Street lost ground, while Treasury yields edged lower. EUR-USD pulled back under 1.0850 from 1.0885 highs. USD-JPY recovered from 107.22 lows to 107.42, before fading again. USD-CAD headed to 1.4042 from early lows of 1.3972, while GBP-USD slipped from 1.2377, to 1.2267.

                    [EUR, USD]
                    EUR-USD topped at one-week highs of 1.0885 early in the session, since pulling back to 1.0847 in afternoon trade. Modest gains came following the cooler U.S. CPI report, though sellers emerged ahead of the 1.0900 level, which is regarded as a psych resistance point. Big picture, the pairing remains inside of recent trading ranges, and until a clearer picture of the re-opening of economies becomes more clear, more of the same is anticipated.

                    [USD, JPY]
                    USD-JPY touched intra day lows of 107.22 in late morning trade, down modestly from 107.45 highs seen early in the session. The risk backdrop has been relatively neutral today, helping to keep the pairing hemmed in. As new virus outbreaks remain a fear as economies attempt to re-open, the risk-sensitive Yen may still be prone to rounds of strength going forward. From here, the 50-day moving average at 107.59 marks resistance, with support coming in at Monday's 106.50 low.

                    [GBP, USD]
                    Cable slipped to 1.2267 lows after the London close, down from early highs of 1.2377. The uncertain tone in global equity markets translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era so far. Despite the high infection rate and death total in the UK, the country this week has commenced a baby-step toward reopening its economy, with non-essential manufacturing reopening. The UK and EU, meanwhile, are amid the next round of trade talks, with agreement likely to remain elusive. As a result, the Pound is likely to remain under some pressure.

                    [USD, CHF]
                    EUR-CHF was held to narrow ranges in the low 1.05s on Tuesday. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

                    [USD, CAD]
                    USD-CAD traded under the 1.4000 mark, after hitting intra day lows of 1.3973 at the North American open, before peaking at 1.4025. The rise in WTI crude prices supported the CAD early on, though general USD softness has weighed on the pairing as well. As USD demand subsequently stepped up, USD-CAD rallied over 1.4040. Canadian crude prices have recently recovered, after trading in negative territory for a few days in the past two-weeks. The Western Canadian Select grade of crude is reportedly fetching over $22.00 on Tuesday. Monday's 1.3900 low is now the nearest support level, with resistance at 1.4030, representing the 50-day moving average.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis May 12, 2020 7:34 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: North America - May 12, 2020

                      The dollar retreated after posting an 18-day high at 100.44, as measured by the narrow trade-weighted DXY index. EUR-USD concurrently rebounded to a high of 1.0837 after posting a five-day low at 1.0784. The dollar's biggest decline was seen against the commodity currencies, which rebounded during the London morning after underperforming during the Asia-Pacific session, correlating inversely with stock markets, with European stock markets rallying after a mostly negative day across Asia-Pacific bourses. AUD-USD was showing a 0.5% gain in printing a high at 0.6518 after earlier showing a loss of a similar magnitude, which left a five-day low at 0.6432. Other commodity currencies saw a similar down-then-up price action. USD-CAD lifted to a five-day high at 1.4065 before subsequently falling to a 1.3977 low. USD-JPY, meanwhile, has been trading with little direction, plying a narrow range just below the 19-day low seen yesterday at 107.78. June WTI oil prices rose by over 5% in returning to levels around $25.50, nearing the one-month high seen last week at$ 26.08. The pan-Europe Stoxx 600 equity index gained 0.5%. There is a battle between glass-half-full and glass-half-empty viewpoints in markets. On the half-full side, China announced a new list of U.S. imports eligible for tariff waivers, helping allay at least some investor concerns about the fraying in U.S.-China relations, while major economies are continuing to reopen after lockdowns. On the half-empty side are concerns about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections yesterday, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again.

                      [EUR, USD]
                      EUR-USD edged out a five-day low at 1.0784 on the back of dollar firmness, before recouping to near net unchanged levels in the lower 1.0800s. The pair trade to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect EUR-USD to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies.

                      [USD, JPY]
                      USD-JPY has been plying a narrow range below the 19-day low seen yesterday at 107.78, though the yen has gained against commodity and many developing-world currencies today amid an evolving risk-on trade. Asian stock markets have been under water, although many markets in the region have seen a paring in declines during their respective afternoon sessions after China announced a new list of U.S. imports eligible for tariff waivers. China's state-run Global Times had earlier reported that "unidentified advisers" on the Chinese side were keen to invalidate the "Phase 1" trade deal and renegotiate it, to which President Trump responded with, "not interested. We signed a deal." Aside from the fraying in relations between the world's two biggest economic superpowers, markets are concerned about the risk of a second wave of coronavirus infections as economies reopen from lockdowns. Wuhan in China, the origin of the virus, reported new infections yesterday, as did South Korea, and Russian reported a record daily increase in confirmed cases. German has also seen its "R rate" (the reproduction rate of the virus) rise back above 1, indicating that the virus is spreading exponentially again. The combo of trade and geopolitical tensions and fears of a second wave of coronavirus infections, looks set to keep risk-off positioning in play, which in turn should be supportive of the yen versus most other currencies.

                      [GBP, USD]
                      Cable has remained heavy after yesterday posting a five-day low at 1.2284. The pairing is back in the lower reaches of the range that's been prevailing since early April, which in turn marks a consolidation of the gains seen out of the 35-year low at 1.1409 that was seen in mid March. Sterling has become apt to correlate with global stock market direction do far in the era of the pandemic crisis. The UK has proved vulnerable to the pandemic, both economically, due to the nation's open economy, current account deficit, and outsized financial sector, and in terms on contagion, as a consequence the major international hub that is London, which served as a gateway for the coronavirus to spread throughout the UK. The UK currently has just over 219k confirmed cases, which is the fourth highest national total in the world (after the U.S., Spain and Russia), and the second highest Covid-19 deaths (at nearly 32k). Despite the high totals, reported cases are now in decline and the UK yesterday commenced its first baby-step to reopening its economy, with non-essential manufacturing reopening. The UK and EU, meanwhile, have commenced the next round of trade talks. The British government has continued to insist that there will be no delay in the UK's end-of-year departure from its Brexit transition membership of the EU's customs union and single market. The UK has until July 1st to commit to this, so the pressure is on negotiators. Markets will continue to factor in a risk that the UK leaves the EU at the end of the year without a new trade deal, as many analysts see there is insufficient time to negotiate a new deal, even though the two sides are starting from perfect equivalence. Leaving the single market (which includes 40 free trade deals with global economies) without a new trade deal in place would mean a large portion of the UK's trade would switch to much less favourable WTO terms and conditions.

                      [USD, CHF]
                      The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

                      [USD, CAD]
                      USD-CAD printed a five-day high at 1.4065, with the Canadian dollar having weakened amid a backdrop of flagging global stock markets amid concerns about fraying relations between the U.S. and China at a time when news of various upticks in the coronavirus rates of infections in various major economies is fanning fears of there being second waves in infection rates, with nations only just beginning to reopen from lockdowns. USD-CAD yesterday posted a 12-day low at 1.3901 before rebounding. Oil prices are moderately firmer today, continuing to consolidating off the one-month high seen last week at $26.08 (June WTI pricing). The high marked a 258% rebound from the April-28th low at $10.07. Prices still remain down by over 60% from the January high, and well off the average price that has prevailing in recent years. The massive rotation lower in oil prices, caused by a supply/demand imbalance of historic proportions as a consequence of virus-containing lockdown measures in many global economies, marks a significant deterioration in Canada's terms of trade, given the importance of oil exports to the nation. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 8% drop versus the yen, reflects the pricing-in of this reality in currency markets. Going forward, focus is on economies that are reopening from virus-containing lockdowns, and how successful, extensive and durable this proves to be. All going well, this would rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency. Goldman Sachs is forecasting crude prices at $51 in 2021. There is a risk of setbacks, of course, in the event that reopenings cause a significant second wave of infections.

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