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Topics7137 Posts7182
By XE Market Analysis May 12, 2020 4:03 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5061
    XE Market Analysis: Europe - May 12, 2020

    A decline in commodity prices has been the main theme so far today, which has been concomitant with a rotation lower in global stock markets. AUD-USD dropped by about 0.5% in printing a five-day low at 0.6432. The Kiwi dollar has seen a similar price action, as has the Canadian dollar and other commodity correlators. USD-CAD lifted to a five-day high at 1.4065. Elsewhere, 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. USD-JPY has been plying a narrow range just below the 19-day low seen yesterday at 107.78. In other markets, June WTI oil prices are moderately softer today, continuing a consolidating off the one-month high seen last week at$ 26.08. 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.

    [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 just 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.

    XE Currency Blog

    Topics7137 Posts7182
    By XE Market Analysis May 11, 2020 3:03 pm
      XE Market Analysis's picture
      XE Market Analysis Posts: 5061
      XE Market Analysis: Asia - May 11, 2020

      The Dollar was firmer to start the week, taking the DXY from early lows of 99.93 to a high of 100.28. Trading ranges were relatively narrow. There was no data released on Monday. Wall Street started out under water, though improved some later in the session, as tech stocks outperformed. Market concerns of re-opening the economy too quickly resulting in another wave of the virus, should continue to keep investors cautious. EUR-USD touched 1.0803 lows, down from 1.0844 highs. USD-JPY traded to near three-week highs of 107.75, from a 107.24 low. USD-CAD peaked at 1.4040, from a 1.3976 base. GBP-USD was held between 1.2362 and 1.2283.

      [EUR, USD]
      EUR-USD peaked at 1.0844 at mid-morning, up from opening lows of 1.0813. The pairing has since bottomed at 1.0803 into the London close. General USD buying was in place through the morning session, since ebbing as Wall Street pared losses. EUR-USD remains inside of ranges seen last week, and with the market continuing to look through data releases, we look for more of the same this week.

      [USD, JPY]
      USD-JPY has rallied steadily through the N.Y. session, topping at 107.75, up from 107.24 lows after the open, and overnight lows of 106.50. The pairing was bid during Asian trade, as local stocks markets rose, and remained bid on safe-haven USD buying in the U.S. session, as the re-opening of the U.S. economy raises fears over increasing coronavirus infections, which has weighed on Wall Street. USD-JPY has traded above its 50-day moving average for the first time since April 20.

      [GBP, USD]
      Cable fell from overnight highs of 1.2437 to 1.2283 in early N.Y. trade, driven by a moderate bid in the dollar. The U.K. today commenced its first baby-step to reopening its economy, with non-essential manufacturing now reopening. The UK and EU will commence with the next round of trade talks today. 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.

      [USD, CHF]
      EUR-CHF was held to narrow ranges in the low 1.05s to start the week. 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 edged off of 1.4015 highs following reports that Saudi would cut oil production more than expected, which saw WTI crude rally over $1/bbl. The pairing fell back to 1.3978 lows, though remains well above the 1.3900 lows seen in Asian dealings. Risk-off conditions have supported USD-CAD generally today, though bigger picture, the CAD does not appear to have much further upside with oil prices remaining in the $20s. Later, as WTI crude gave back gains, USD-CAD rallied to 1.4040 highs, and back above its 50-day moving average at 1.4018.

      XE Currency Blog

      Topics7137 Posts7182
      By XE Market Analysis May 11, 2020 7:02 am
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        XE Market Analysis Posts: 5061
        XE Market Analysis: North America - May 11, 2020

        The dollar picked up safe haven demand as equity markets turned lower during the European morning after most markets in Asia-Pacific rose, while commodity currencies more than gave back intraday gains. The narrow trade-weighted USD index posted a four-day high at 100.09. EUR-USD concurrently ebbed below Friday's low in posting a low at 1.0809. AUD-USD and AUD-JPY more than erased gains, with going from an intraday gain of around 0.5% to an intraday loss of over 0.5% in printing a low at 0.6484, leaving an 11-day high at 0.6562. USD-CAD rebounded toward 1.4000 after earlier posting an 11-day low at 1.3901. While the yen lost ground to the commodity currencies, dollar outperformance lifted USD-JPY to a 10-day high at 107.32. Countries from Japan and New Zealand, to France and the UK, are loosening lockdown rules, though South Korea today warned of a second wave of infections while cases in the U.S. appear to be rising, and Wuhan in China reported five new Covic-19 cases, the highest since March 11. The PBoC stated it will use "more powerful" policies to support the economy, while the BoJ's "Summary of Opinions" from its late-April policy meeting noted a consensus concern about downside risks to the prospects of economic recovery. There seems good reason for markets, having been pricing-in a phased reopening from lockdown across global economies, to pause at some point, to wait-and-see how the loosening-up process goes.

        [EUR, USD]
        EUR-USD ebbed below Friday's low in posting a low at 1.0809. The decline from the mid 1.0800s reflected a broad bid in the dollar, which picked up safe haven demand as European stock markets and U.S. equity index futures turned lower (after a mostly positive session in Asia-Pacific). EUR-USD continues to 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]
        The yen pared most of the gains it saw against the commodity currencies, which rose amid a backdrop of rising stock markets during the Asia-Pacific session, before dropping during the European AM session, when equities came under pressure. Countries from Japan and New Zealand, to France and the UK, are loosening lockdown rules, though South Korea today warned of a second wave of infections while cases in the U.S. appear to be rising, and Wuhan in China reported five new Covic-19 cases, the highest since March 11. The PBoC stated it will use "more powerful" policies to support the economy, while the BoJ's "Summary of Opinions" from its late-April policy meeting noted a consensus concern about downside risks to the prospects of economic recovery. There seems good reason for markets, having been pricing-in a phased reopening from lockdown across global economies, to pause at some point, to wait-and-see how the loosening-up process goes. Should such a theme take a grip, this would underpin the yen. Another concern is the deterioration in relations between the U.S. and other Western nations and China. While the U.S. and China are so far taking a pragmatic stance on trade, tensions between the two economic superpowers remain tense, with the Trump administration ratcheting up its accusations against China about the origin of the coronavirus pandemic. Reports suggest that the White House is considering taking a number of measures against China, including the possibility of tariffs. Trump may be motivated for blaming China as he faces a presidential election in six months, but the fraying relations is more than just electoral politics. The U.S. has been growing uneasy about China's power in multilateral organisations, such as the World Health Organisation and World Bank, feeling a need to reassert itself. Aside from geopolitics, there is also a risk that markets are pricing in a too optimistic view on the potential for a strong rebound. Most economies are unlikely to return to pre-pandemic normality until such time there is a vaccine or a cure for the Covid-19 disease that the coronavirus causes.

        [GBP, USD]
        Cable fell below Friday's low in posting a nadir at 1.2347, driven by a moderate bid in the dollar. This puts the pairing 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 massive 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 has today commenced its first baby-step to reopening its economy, with non-essential manufacturing now reopening. The UK and EU will commence with the next round of trade talks today. 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 deal 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 posted an 11-day low at 1.3901. Oil prices are moderately softer today, consolidating off the one-month highs seen last week. June WTI oil prices last week posted a 29-day high at $26.08, which 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 7% 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. This should 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, in the event that reopenings cause a significant second wave of infections.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis May 11, 2020 4:31 am
          XE Market Analysis's picture
          XE Market Analysis Posts: 5061
          XE Market Analysis: Europe - May 11, 2020

          The yen has continued to weaken and commodity currencies strengthen amid a backdrop of mostly buoyant stock markets in Asia-Pacific, though risk-on sentiment has been flagging during the PM session in the region. Countries from Japan and New Zealand, to France and the UK, are loosening lockdown rules, though South Korea warned of a second wave of infections, cases in the U.S. appear to be rising, while Wuhan in China has reported five new Covic-19 cases, the highest since March 11. The PBoC stated it will use "more powerful" policies to support the economy, while the BoJ's "Summary of Opinions" from its late-April policy meeting noted a consensus concern about downside risks to the prospects of economic recovery. There seems good reason for markets, having been pricing-in a phased reopening from lockdown across global economies, to pause at some point, to wait-and-see how the loosening-up process goes. For now, though, the dial has remained on the risk-on side of the scale. Yen underperformance, reflecting an unwinding in the Japanese currency's safe haven premium, saw USD-JPY lift by 0.5% in printing a one-week high at 107.14, returning the pair to the upper part of the range that's been prevailing over the last couple of weeks. The commodity currencies, meanwhile, have continued to outperform. AUD-USD posted an 11-day high at 0.6561, which is 10 pips shy of the two-month high that was seen in late April. AUD-JPY rallied by over 0.7% in pegging an 11-day high at 70.18, with the cross only needing to break above here to put it in two-month territory. USD-CAD posted an 11-day low at 1.3901. Oil prices are moderately softer today, consolidating off the one-month highs seen last week. EUR-USD and Cable have been trading steadily so far today. Note that the UK and EU will commence with the next round of trade talks today.

          [EUR, USD]
          EUR-USD has been plying a narrow range in the mid 1.0800s, while yen weakness drove EUR-JPY into six-day high territory. The euro has, meanwhile, lost ground to the outperforming commodity currencies today, while continuing to hold steady against the pound and other currencies. EUR-USD continues to 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]
          The yen has continued to weaken and commodity currencies strengthen amid a backdrop of mostly buoyant stock markets in Asia-Pacific, though risk-on sentiment has been flagging during the PM session in the region. Countries from Japan and New Zealand, to France and the UK, are loosening lockdown rules, though South Korea warned of a second wave of infections, cases in the U.S. appear to be rising, while Wuhan in China has reported five new Covic-19 cases, the highest since March 11. The PBoC stated it will use "more powerful" policies to support the economy, while the BoJ's "Summary of Opinions" from its late-April policy meeting noted a consensus concern about downside risks to the prospects of economic recovery. There seems good reason for markets, having been pricing-in a phased reopening from lockdown across global economies, to pause at some point, to wait-and-see how the loosening-up process goes. Should such a theme evolve, this would underpin the yen. Another concern is the deterioration in relations between the U.S. and other Western nations and China. While the U.S. and China are so far taking a pragmatic stance on trade, tensions between the two economic superpowers remain tense, with the Trump administration ratcheting up its accusations against China about the origin of the coronavirus pandemic. Reports suggest that the White House is considering taking a number of measures against China, including the possibility of tariffs. Trump motives for blaming China are not just that he faces a presidential election in six months; the fraying relations is more than just electoral politics. The U.S. has been growing uneasy about China's power in multilateral organisations, such as the World Health Organisation and World Bank, feeling a need to reassert itself. Aside from geopolitics, there is also a risk that markets are pricing in a too optimistic view on the potential for a strong rebound. Most economies are unlikely to return to pre-pandemic normality until such time there is a vaccine or a cure for the Covid-19 disease that the coronavirus causes.

          [GBP, USD]
          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, economically due to the nation's open economy, current account deficit, and outsized financial sector, and in terms on contagion, as a consequence the massive 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 has today commenced its first baby-step to reopening its economy, with non-essential manufacturing now reopening. The UK and EU will commence with the next round of trade talks today. 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 deal 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 posted an 11-day low at 1.3901. Oil prices are moderately softer today, consolidating off the one-month highs seen last week. June WTI oil prices last week posted a 29-day high at $26.08, which 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 7% 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. This should 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, in the event that reopenings cause a significant second wave of infections.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis May 8, 2020 2:58 pm
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: Asia - May 08, 2020

            After ticking slightly higher following the horrific, but slightly better than expected April employment report, the Dollar pulled back on position squaring driven trade into the weekend. April non-farm payrolls fell 20.5 mln, leaving the unemployment rate at 14.7%. Wall Street moved higher on hopes the economy will slowly come out of lock down. Treasury yields were mixed, with the short end outperforming, steepening the curve. EUR-USD dipped to 1.0815 lows from near 1.0850 after the jobs report, later rebounding to 1.0875. USD-JPY rallied to 106.75 from 106.30, later easing under 106.40. USD-CAD bottomed at 1.3909, from a high of 1.3965, while GBP-USD made its way to 1.2467 from 1.2357.

            [EUR, USD]
            EUR-USD bounced from mid-morning lows of 1.0815, before rallying to four-session highs of 1.0875 into the European close. Conditions were thin as a result of today's London bank holiday, which saw a move from lows to highs with a one-hour period. Pre-weekend short covering was a factor, following relatively sharp losses seen this week. Bigger picture, given the full-bore easings from both the ECB and the Fed, and equally dismal economic outlooks, we see EUR-USD maintaining recent trading ranges for the time being.

            [USD, JPY]
            USD-JPY got a boost to 106.72 highs from 106.28 following the U.S. jobs report, which was marginally better than expected. The pairing has since fallen back to 106.40 into the London close, as long positions are pared into the weekend. Big picture, the safe-haven JPY will likely return to bouts of strength, as economic recovery from the pandemic is not likely to be linear, as it remains unclear to what degree economies can recover, especially with the unknowns of how the virus spread plays out.

            [GBP, USD]
            Cable rallied to 1.2467 at mid-morning, as the Dollar overall came under some pressure. The UK's lockdown is being extended for another three weeks, although with some minor tweaks in what can be seen as baby steps toward reopening. Prime Minister Johnson will detail this in an address on Sunday. The UK currently has the fourth highest number of Covid-19 cases in the world, at 205k, thought by many to be a consequence of a late response to containing the coronavirus and of London being a massively internationally connected hub, which makes the UK particularly exposed to global pandemics.

            [USD, CHF]
            EUR-CHF was held to narrow ranges in the low to mid 1.05s through the week. 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 dipped to seven-session lows of 1.3909 following the ugly, but not as bad as expected Canada jobs report. The pairing since bounced to 1.3964, with the move coming on pre-weekend short covering, driven by WTI crude's inability to trade over the $25 mark, after falling from one-month highs of $26.74 on Thursday. Resistance now comes at 1.4005, the 50-day moving average, with support seen at the 1.3900 level.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis May 8, 2020 3:58 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: Europe - May 08, 2020

              The dollar and yen have weakened, mostly against the commodity and other currencies with higher beta characteristics. This has come amid rallying stock markets, which are pricing-in a reopening of major economies from virus-containing lockdowns, overlooking dismal data (such as a 6% plunge in Japanese household spending, in data released today, and an expected 16% plunge in U.S. April unemployment, in data released later) as being backward looking. Yesterday's unexpected 8.2% y/y rise in Chinese exports in April, contrary to the median forecast for a 14.1% contraction, was a tonic for investors, while news that the U.S. and China have agreed to strengthen cooperation in trade talks has gone down well, too. In the mix have been solid earnings out of the tech sector, particularly PayPal, reflecting the shift to online shopping in the lockdown era. The narrow trade-weighted USD index (DXY) dropped to a three-day low at 99.71, coming with Fed funds futures discounting negative interest rates in the U.S., and with the 2-year U.S. T-note yield posting a record low yesterday. Dollar weakness lifted EUR-USD to a three-day peak at 1.0855, putting in some distance from the two-week low seen yesterday at 1.0766. Buoyant global stock markets have seen some of the yen's built-in safe-haven premium unwind. While USD-JPY has settled in the mid 106.00s, due to concurrent dollar weakness, EUR-JPY extended its rebound gains from three-and-a-half-year lows for a second day, today reaching a two-day peak of 115.46. AUD-USD and AUD-JPY rallied by a respective 0.9% and 0.8% in posting four-day and one-week highs, at 0.6961 and 69.61. USD-CAD printed an eight-day low at 1.3923, aided by continued buoyancy in oil prices. June WTI crude futures lifted back by about 6%, to levels near $26, after posting a correction low at $22.94 yesterday.

              [EUR, USD]
              Dollar weakness lifted EUR-USD to a three-day peak at 1.0855, putting in some distance from the two-week low seen yesterday at 1.0766, while concurrent yen weakness drove EUR-JPY to a two-day high at 115.46. The euro has in the meantime lost ground to the commodity currencies while holding steady against the pound and other currencies. EUR-USD continues to 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 reopeing strategies.

              [USD, JPY]
              The yen has continued to soften against the commodity currencies and, to a lesser extent, most other currencies, although concurrent dollar weakness has left USD-JPY on a steady footing. This has come amid rallying stock markets, which are pricing-in a reopening of major economies from virus-containing lockdowns. Markets (at least equity and forex markets) are overlooking dismal data (such as a 6% plunge in Japanese household spending, in data released today, and an expected 16% plunge in U.S. April unemployment, in data released later) as being backward looking. Yesterday's unexpected 8.2% y/y rise in Chinese exports in April, contrary to the median forecast for a 14.1% contraction, was a tonic for investors, while news that the U.S. and China have agreed to strengthen cooperation in trade talks has gone down well, too. This backdrop has seen the some of the yen's built-in safe-haven premium unwind. USD-JPY has been settled in the mid 106.00s, thanks to dollar weakness, while EUR-JPY has extended its rebound gains from three-and-a-half-year lows for a second day, today reaching a two-day peak of 115.46. AUD-USD rallied by nearly 1% to a four-day high at 0.6961. While the U.S. and China are being pragmatic on the trade front, tensions between the two economic superpowers remain tense, with the Trump administration ratcheting up its accusations against China about the origin of the coronavirus pandemic. Reports last week suggested that the White House is considering taking a number of measures against China, including new tariffs. It should be obvious that Trump motives for blaming China are high six-months out from a presidential election, though the fraying relationsis more than just electoral politics. The U.S., and other Western nations, have been growing uneasy about China's power in multilateral organisations, such as the World Health Organisation and World Bank, feeling a need to reassert itself. Aside from geopolitics, there is also a risk that markets are pricing in a too optimistic view on the potential for a strong rebound. Most economies are unlikely to return to pre-pandemic normality until such time there is a vaccine or a cure for the Covid-19 disease that the coronavirus causes.

              [GBP, USD]
              Cable has settled near the 1.2400 mark after lifting out of a 13-day low at 1.2303 that was seen yesterday in the wake of the BoE policy announcement and press conference. The BoE left is policy framework unchanged following its May MPC meeting, as was widely anticipated with the central bank having already responded to the consequences of the pandemic crisis. There was dovish dissension in the ranks, however, with two of the nine member policy committee (Saunders and Haskel) voting for an increase in QE. BoE Governor Bailey followed up in his post-meeting press conference by emphasizing that the central bank is not out of monetary policy ammunition while pledging appropriate policy responses will be taken, going forward. He also said that information about the easing in lockdown measures will be material at the June meeting of the Monetary Policy Committee. Bailey also stated that the BoE will reach it current QE target by July. On a positive note, he said he expects the rebound out of the lockdown-induced recession will be much quicker than the rebound out of the 2008/09 financial crisis. UK Prime Minister Johnson will on Sunday detail the first phase of reopening in the UK, having been in lockdown since March 23rd, which will start on Monday.

              [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 an eight-day low at 1.3923, aided by continued buoyancy in oil prices. June WTI crude futures lifted back by about 6%, to levels near $26 after posting a correction low at $22.94 yesterday. Oil prices posted a 29-day high on Wednesday, at $26.08, which marked a 258% rebound from the April-28th low at $10.07, although 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 7% 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. This should 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.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis May 7, 2020 2:57 pm
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: Asia - May 07, 2020

                The Dollar attempted to rally early in the N.Y. session on Thursday, though later succumbed to selling pressures, taking the DXY from mid-morning highs of 100.40 to afternoon lows near 99.80. Incoming data was again largely ignored, with jobless claims rising more than expected, and productivity figures fall less than forecasts. Wall Street rallied on talk of resuming U.S./China trade talks, while Treasury yields edged lower. EUR-USD rallied from 1.0767 lows, peaking later over 1.0830 after the London close. USD-JPY peaked at 106.65 from opening levels near 106.40, later falling under 106.25. USD-CAD bottomed at 1.3953 after opening near 1.4080. Cable recovered from early low of 1.2266, rallying over 1.2370 after the London close. Friday of course, brings the April jobs report, where we expect non-farm payrolls to fall 22.0 mln.

                [EUR, USD]
                EUR-USD rallied from two-week lows of 1.0767 to highs over 1.0830 through the morning session. European buyers were reported buyers into the London close. With London on holiday on Friday, we suspect some of the buying interest has been short covering into the long weekend. Recall, EUR-USD has posted four-consecutive sessions of lower daily lows, coming from 1.1020 highs from last Friday to today's low of 1.0767. Bigger picture, given the full-bore easings from both the ECB and the Fed, and equally dismal economic outlooks, we see EUR-USD maintaining recent trading ranges for the time being.

                [USD, JPY]
                USD-JPY made its way to 106.65 highs, after trending lower through much of the week. Market sentiment improves on the back of better China export data, which weighed some on the Yen. The pairing has since retreated under 106.25. Big picture, the safe-haven JPY will likely return to bouts of strength, as economic recovery from the pandemic is not likely to be linear.

                [GBP, USD]
                Cable printed a better than two-week low of 1.2266 in early N.Y. trade, on its way from 1.2413 highs seen after the BoE kept policy unchanged, as expected, and called for a strong economic rebound in 2021. GBP-USD subsequently headed higher, as broad USD weakness emerged, taking the pairing to highs over 1.2375 after the London close. The U.K. is on holiday Friday, which might have driven a round of Sterling short-covering.

                [USD, CHF]
                EUR-CHF was slightly higher in the low to mid-1.05s in N.Y. trade on Thursday, as risk-taking levels ticked higher. 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 fell to 1.3953 lows after opening near 1.4080, and peaking at 1.4173 after the close on Wednesday. The move lower came as WTI crude rallied over 9% to one month highs over $26.70. The risk-on conditions on Thursday have supported the CAD as well. Oil later gave back all its gains, though a round of broad USD selling kept USD-CAD heavy near 1.3980 into the close.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis May 7, 2020 7:27 am
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: North America - May 07, 2020

                  The commodity currencies have traded firmer, boosted by an unexpectedly good trade report out of China, which reported a 8.2% y/y rise in exports, contrary to the median forecast for a 14.1% contraction. The data helped Asian stock markets pare intraday losses, and European stocks to rally, offsetting fresh volleys of anti-China rhetoric from U.S. President Trump and his Secretary of State, Pompeo (Trump focusing on trade, Pompeo on the coronavirus pandemic). AUD-USD rose by over 1% in posting a high at 0.6473, and AUD-JPY rose by nearly 1.5%. The Kiwi dollar also gained, as did the Canadian dollar. USD-CAD, after posting a two-week high at 1.4163, ebbed back under 1.4100. The dollar pared gains. The narrow traded-weighted USD index (DXY) dipped under 100.00 after earlier edging out a 10-day high at 100.23. EUR-USD edged out a new 13-day low at 1.0778. The yen has corrected after a period of outperformance. USD-JPY climbed above 106.50, putting in some distance from yesterday's seven-week low at 105.98. EUR-JPY has also staged a rebound after dropping sharply in recent sessions, which yesterday left a three-and-a-half-year low at 114.43. The pound reversed intraday gains seen in the immediate wake of the BoE policy announcement, with BoE Governor Bailey following up in his post-meeting press conference by emphasizing that the central bank is not out of monetary policy ammunition while pledging appropriate policy responses will be taken, going forward. Cable dropped back to he mid 1.2300s after earlier printing a high at 1.2418. Ahead of the BoE announcement, the pound had posted a 13-day low at 1.2310. The BoE left is policy framework unchanged following its May MPC meeting, as was widely anticipated with the central bank having already responded to the consequences of the pandemic crisis.

                  [EUR, USD]
                  EUR-USD edged out a new 13-day low at 1.0778. The pair continues to 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. Both Europe and the U.S. are also now pursing economic reopeing strategies, too.

                  [USD, JPY]
                  The yen has corrected after a period of outperformance, amid a back of rising global stock markets. USD-JPY climbed above 106.50, putting in some distance from yesterday's seven-week low at 105.98. EUR-JPY has also staged a rebound after dropping sharply in recent sessions, which yesterday left a three-and-a-half-year low at 114.43. AUD-JPY rallied by over 1% as the Japanese currency lost ground to the commodity currencies following an unexpected 8.2% y/y rise in Chinese exports in April, contrary to the median forecast for a 14.1% contraction, which lifted stock markets in Asia. The Chinese data offset a fresh volleys of anti-China rhetoric from U.S. President Trump and his Secretary of State, Pompeo (Trump focusing on trade, Pompeo on the coronavirus pandemic). Going forward, we expect the Japanese currency to remain apt to outperformance, partly on the view that stock markets may have been factoring in an overly optimistic impact from phased economic reopening, and partly due to the Trump administration ratcheting up its accusations against China about the origin of the coronavirus pandemic. Reports last week suggested that the White House is considering taking a number of measures against China, including new tariffs. It should be obvious that Trump motives for blaming China are high six-months out from a presidential election, though the fraying relations between the two economic superpowers is more than just electoral politics. The U.S., and other Western nations, have growing uneasy about China's power in multilateral organisations, such as the World Health Organisation and World Bank, feeling a need to reassert itself. The pandemic, coupled with the rapidly deteriorating tensions between the U.S. and China, is likely to be disruptive for global markets, which should in turn maintain safe-haven demand for the yen.

                  [GBP, USD]
                  The pound has erased earlier gains seen in the immediate wake of the BoE policy announcement, with BoE Governor Bailey following up in his post-meeting press conference by emphasizing that the central bank is not out of monetary policy ammunition while pledging appropriate policy responses will be taken, going forward. He also said that information about the easing in lockdown measures will be material at the June meeting of the Monetary Policy Committee. Bailey also stated that the BoE will reach it current QE target by July. The pound had initially lifted on Bailey's remark that he expects the recovery from the lockdown to be much more rapid than from the global financial crisis of 2008/9. Cable dropped back to he mid 1.2300s after earlier printing a high at 1.2418. Ahead of the BoE announcement, the pound had posted a 13-day low at 1.2310. The BoE left is policy framework unchanged following its May MPC meeting, as was widely anticipated with the central bank having already responded to the consequences of the pandemic crisis. There was dovish dissension in the ranks, with two of the nine member policy committee (Saunders and Haskel) voting for an increase in QE. The pound has developed a distinct pandemic era characteristic of correlating closely with global stock market direction (i.e. risk appetite), similar to a high beta commodity currency. While Cable is up by about 8.5% from the 35-year low seen in mid March, the pair remains down by about 6.5% on the year-to-date, and is the first time since the 1980s that the pound has consistently traded below 1.3000. UK Prime Minister Johnson will on Sunday detail the first phase of reopening in the UK, having been in lockdown since March 23rd, which will start on Monday.

                  [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 back under 1.4100 after earlier posting a two-week high at 1.4163. Softer oil prices had been weighing on the Canadian dollar before unexpectedly good trade report out of China, which reported a 8.2% y/y rise in exports, contrary to the median forecast for a 14.1% contraction, catalysed a about of risk appetite, which lifted the Loonie and other commodity currencies. June WTI crude futures posted a two-day low near $23.50, correcting after scaling to a three-week high yesterday. Crude prices remain up by over 230% from the low seen near $10 on April 28th, though prices still remain down by over 74% from the highs seen in January. Goldman Sachs research this week raised its 2021 oil price forecast to $51. The 8.5% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 10% drop versus the yen, reflects the pricing-in of this reality (the erosion in Canada's terms of trade) 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. This should rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis May 7, 2020 3:56 am
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5061
                    XE Market Analysis: Europe - May 07, 2020

                    The commodity currencies have traded firmer, boosted by an unexpectedly good trade report out of China, which reported a 8.2% y/y rise in exports, contrary to the median forecast for a 14.1% contraction. The data helped Asian stock markets pare intraday losses, offsetting fresh volleys of anti-China rhetoric from U.S. President Trump and his Secretary of State, Pompeo (Trump focusing on trade, Pompeo on the coronavirus pandemic). AUD-USD rose over 0.6% in posting a high at 0.6450, which is 4 pips shy of yesterday's peak. The Kiwi dollar also gained, although by a lesser degree, as did the Canadian dollar, despite softer oil prices today. USD-CAD, after posting a two-week high at 1.4163, ebbed back under 1.4100. June WTI crude futures posted a two-day low near $23.50, correcting after scaling to a three-week high yesterday. The dollar pared gains. The narrow traded-weighted USD index (DXY) dipped under 100.10 after earlier edging out a 10-day high at 100.23. EUR-USD plied a narrow range, basing at 1.0786, which is 4 pips above the 13-day low seen yesterday at 1.0782. USD-JPY posted a sub-35 pip range, basing at 106.00, holding just above yesterday's seven-week low at 105.98. Elsewhere, the pound has lifted moderately following the BoE's policy announcement, with Governor Baily saying that he expects the recovery from the lockdown to be much more rapid than from the global financial crisis of 2008/9. The BoE left its policy framework unchanged following its May MPC meeting, as was widely anticipated with the central bank having already responded to the consequences of the pandemic crisis. There was dovish dissension in the ranks, with two of the nine member policy committee (Saunders and Haskel) voting for an increase in QE. Growth and inflation forecasts were slashed in the BoE's quarterly Monetary Policy Report.

                    [EUR, USD]
                    EUR-USD plied a narrow range, basing at 1.0786, which is 4 pips above the 13-day low seen yesterday at 1.0782. The pair continues to 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. There is little divergence in central bank policy, 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. Both Europe and the U.S. are also now pursing economic reopeing strategies, too.

                    [USD, JPY]
                    USD-JPY has posted a sub-35 pip range, basing at 106.00, holding just above yesterday's seven-week low at 105.98, and EUR-JPY has found a footing after dropping sharply in recent sessions, which yesterday left a three-and-a-half-year low at 114.43. The Japanese currency has also softened against the commodity currencies following an expected 8.2% y/y rise in Chinese exports in April, contrary to the median forecast for a 14.1% contraction, which lifted stock markets in Asia. The Chinese data offset a fresh volleys of anti-China rhetoric from U.S. President Trump and his Secretary of State, Pompeo (Trump focusing on trade, Pompeo on the coronavirus pandemic). Going forward, we expect the Japanese currency to remain apt to outperformance, partly on the view that stock markets may have been factoring in an overly optimistic impact from phased economic reopening, and partly due to the Trump administration ratcheting up its accusations against China about the origin of the coronavirus pandemic. Reports last week suggested that the White House is considering taking a number of measures against China, including new tariffs. It should be obvious that Trump motives for blaming China are high six-months out from a presidential election, though the fraying relations between the two economic superpowers is more than just electoral politics. The U.S., and other Western nations, have growing uneasy about China's power in multilateral organisations, such as the World Health Organisation and World Bank, feeling a need to reassert itself. The pandemic, coupled with the rapidly deteriorating tensions between the U.S. and China, is likely to be disruptive for global markets, which should in turn maintain safe-haven demand for the yen.

                    [GBP, USD]
                    The pound has lifted moderately following the BoE's policy announcement, with Governor Baily saying that he expects the recovery from the lockdown to be much more rapid than from the global financial crisis of 2008/9. Cable lifted to a high at 1.2418 after earlier printing a 13-day low at 1.2310. The BoE left is policy framework unchanged following its May MPC meeting, as was widely anticipated with the central bank having already responded to the consequences of the pandemic crisis. There was dovish dissension in the ranks, with two of the nine member policy committee (Saunders and Haskel) voting for an increase in QE. Growth and inflation forecasts were slashed in the BoE's quarterly Monetary Policy Report. The pound has developed a distinct pandemic era characteristic of correlating closely with global stock market direction (i.e. risk appetite), similar to a high beta commodity currency. While Cable is up by about 8.5% from the 35-year low seen in mid March, the pair remains down by about 6.5% on the year-to-date, and is the first time since the 1980s that the pound has consistently traded below 1.3000. UK Prime Minister Johnson will on Sunday detail the first phase of reopening in the UK, having been in lockdown since March 23rd, which will start on Monday.

                    [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, after posting a two-week high at 1.4163, ebbed back under 1.4100. Softer oil prices had been weighing on the Canadian dollar before unexpectedly good trade report out of China, which reported a 8.2% y/y rise in exports, contrary to the median forecast for a 14.1% contraction, catalysed a about of risk appetite, which lifted the Loonie and other commodity currencies. June WTI crude futures posted a two-day low near $23.50, correcting after scaling to a three-week high yesterday. Crude prices remain up by over 230% from the low seen near $10 on April 28th, though prices still remain down by over 74% from the highs seen in January. Goldman Sachs research this week raised its 2021 oil price forecast to $51. The 8.5% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the 4%-plus decline against the euro and near 10% drop versus the yen, reflects the pricing-in of this reality (the erosion in Canada's terms of trade) 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. This should rekindle demand for oil and other commodities, which should in turn put in an underpinning for the Canada's currency.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis May 6, 2020 2:56 pm
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: Asia - May 06, 2020

                      The horrible, but as-expected ADP employment survey had little market impact on Wednesday, leaving the Dollar mixed over all, as it ended up lower versus the Yen, near unchanged against the Euro, and higher versus the CAD and GBP. Wall Street was mixed, with the NASDAQ outperforming, while Treasury yields rose ahead of massive supply both in Treasuries and corporate. EUR-USD topped at 1.0826, fell to 1.0790, then settled about where it started at 1.0810. USD-JPY hit 7-week lows of 105.99, down from early highs of 106.20. USD-CAD rallied to 1.4157 highs, up from 1.4080 at the open. Cable fell to 1.2334 low from 1.2393 highs.

                      [EUR, USD]
                      EUR-USD lifted from the near two-week low of 1.0783 seen ahead of the open, topping later at 1.0826 before slipping back under 1.0800 into the London close. The pairing remains heavy after printing three consecutive lower daily lows. The market continues to digest the German constitutional court ruling on Tuesday that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law, which has weighed on the Euro, while the European Commission slashing its forecasts for Eurozone growth, to -7.7% for 2020, likely hasn't helped as well.

                      [USD, JPY]
                      USD-JPY broke out of its recent trading range, dropping to 105.99 lows, levels last seen on March 17. The safe-haven Yen appears to have been bid up the past 2 sessions on Trump talk where he has threatened to impose new tariffs on China, and even cancel the phase 1 trade deal should China fall short on buying U.S. goods. Rising tensions between the two countries are likely to continue to support the JPY going forward. USD-JPY buyers are noted into the 106.00 level, though sell-stops are expected on a move under 105.95.

                      [GBP, USD]
                      Cable fell to near two-week lows of 1.2335 into the London close, down from early highs of 1.2392. The UK's April construction PMI plummeted to a headline record low of of just 8.2, down from 39.3 in March. UK Prime Minister Johnson earlier said that he will on Sunday detail the first phase of reopening in the UK, having been in lockdown since March 23rd.

                      [USD, CHF]
                      EUR-CHF was steady in the low 1.05s in N.Y. trade on Wednesday, as risk-taking levels more neutral. 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 advanced to 1.4157 highs, up from overnight lows of 1.4023. Much of the move higher came in concert with oil price declines, as WTI crude fell from the three-week highs of $26.08 seen in Asia, to $22.59 lows printed early in the North American session. The April 23 high of 1.4198 now marks resistance, with support at yesterday's 1.4008 lows.

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