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By XE Market Analysis May 6, 2020 7:25 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5061
    XE Market Analysis: North America - May 06, 2020

    The yen has been outperforming so far today, with the dollar following behind. The biggest losers out of the main currencies were the euro and the pound. Stock markets in Europe flagged, while S&P 500 futures rose nearly 1%, and oil prices hit fresh rebound highs. Investors continued to digest the German constitutional court ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law, though the ECB brushed this off (and, crucially, the German court refrained from ruling that the ECB's asset purchase program violate its mandate). EUR-USD nevertheless fell nearly 0.5% in printing a 12-day low at 1.0787. USD-JPY edged out a fresh seven-week low, at 106.21, while EUR-JPY posted a three-and-a-half year low at 114.62 reflecting both yen safe-haven driven outperformance and euro underperformance. Tokyo markets remained closed for Japan's Golden Week holidays, and will reopen tomorrow. Chinese markets reopened after the long May Day holidays. USD-CAD ebbed to the lower 1.40s, though has so far remained above yesterday's five-day low at 1.4006. June WTI crude futures posted a fresh three-week high at $25.57, marking a gain of over 250% from the low seen on April 28th, though prices still remain down by over 70% from the highs seen in January. Cable fell below recent lows in making a nine-day low at 1.2359, nearing the April-21 low at 1.2347. Final April Eurozone services and composite PMI data, and April UK construction PMI data painted a grim picture, although nota surprise in the lockdown era, with markets largely desensitized to bad economic data and looking ahead to economic reopenings. The SNB's intervening actions have not been going unnoticed. An FT article cited analyst concerns about the ballooning SNB balance sheet, which is a consequence of its intervention to cap franc strength by buying foreign currencies, and which risks the credibility of the central bank.

    [EUR, USD]
    The euro has continued to trade lower against the dollar and yen, which today has come amid backdrop of sputtering European stock markets, with investors continuing to digest the German constitutional court ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law (although, crucially, refraining from ruling that the ECB's asset purchase program violate its mandate). EUR-USD fell nearly 0.5% in printing a 12-day low at 1.0787. The puts the pair further 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 reopening strategies.

    [USD, JPY]
    USD-JPY edged out a fresh seven-week low, at 106.21, while EUR-JPY posted a three-and-a-half year low at 114.62 reflecting both yen safe-haven driven outperformance and euro underperformance. Tokyo markets remained closed for Japan's Golden Week holidays, and will reopen tomorrow. 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 biggest economies is a real concern for investors.

    [GBP, USD]
    The pound has taken a rotation lower amid a backdrop of flagging European stock markets. The biggest declines have been seen against the dollar and yen, with the pound down by 0.5% and 0.7%, respectively, against the two outperformers, which have been gathering safe haven demand. This has pushed Cable below recent lows, to a nine-day low at 1.2359, nearing the April-21 low at 1.2347. A breach below the latter would put the pairing in one-month low terrain. GBP-JPY has descended into six-week territory, while EUR-GBP has retraced some of the declines seen yesterday, after the German constitutional court ruling on the ECB. The UK's April construction PMI put in an eye-watering plummet to a headline reading of just 8.2, down from 39.3 in March, missing the median forecast for a 22.2 reading, although still not much of a surprise in the lockdown era, with markets largely desensitized to bad economic data. The pound's underperformance fits the pandemic era characteristic of the currency to correlate with global stock market direction (i.e. risk appetite), similar to a high beta commodity currency. While Cable is up by over 8% from the 35-year low seen in mid March, the pair remains down by nearly 7% on the year-to-date, and is the first time since the 1980s that the pound has consistently traded below 1.3000. Part of the reason for this is a built-in Brext-risk discount, with the UK government have repeated affirmed that the UK will leave transitional membership of the EU's single market at year-end, even with a new trade deal being in place. The other main reason is the UK's vulnerability in the pandemic crisis era, which is a consequence of UK's open economy, current account deficit and outsized financial sector.

    [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 ebbed to the lower 1.40s, though has so far remained above yesterday's five-day low at 1.4006. The Canadian currency, along with other oil-correlating currencies, has been underpinned a continued rise in oil pricers. June WTI crude futures posted a fresh three-week high at $25.57, marking a gain of over 250% from the low seen on April 28th, though prices still remain down by over 70% from the highs seen in January. Goldman Sachs research this week raised its 2021 oil price forecast to $51. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 4% decline against the euro and near 10% 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.

    XE Currency Blog

    Topics7137 Posts7182
    By XE Market Analysis May 6, 2020 3:55 am
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      XE Market Analysis Posts: 5061
      XE Market Analysis: Europe - May 06, 2020

      Currencies have been plying overall narrow ranges so far today against a backdrop of mostly buoyant global stock markets and a fresh three-week high in oil prices, with investors anticipating a lift in demand as economies reopen from lockdowns. Chinese markets reopened from the extended May Day holiday, while Japanese markets remained closed (reopening tomorrow). The narrow trade-weighted USD index has settled just off the eight-day high seen yesterday at 99.97. EUR-USD edged out an eight-day low at 1.0817, marking a third consecutive lower low. Yesterday's German constitutional court ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law, has weighed on the euro (although, crucially, refraining from ruling that the ECB's asset purchase program violate its mandate). USD-JPY edged out a fresh seven-week low, at 106.21, while EUR-JPY posted a three-year low at 115.06, reflecting increment yen gains, despite the prevailing optimism in global stock markets. The Australian and New Zealand dollars outperformed, albeit marginally, with both remaining below their respective highs versus the dollar from yesterday. The RBNZ warned about the consequences of the global lockdowns, though to little impact on the Kiwi. New Zealand Q1 employment data beat forecasts, rising 0.7% q/q versus the median forecast for a 0.2% contraction, though the data largely precedes the New Zealand lockdown. Data out of China encouraged, showing sales of heavy trucks rose 50% in April, marking a 52% y/y increase, rebounding strongly after sales contracted by 16% in Q1. Figures also showed a 60% rise in customer flows over the May Day holiday weekend, even though restrictions haven't fully been lifted and spending remains consequently impacted. The SNB's intervening actions have not been going unnoticed. An FT article cited analyst concerns about the ballooning SNB balance sheet, which is a consequence of its intervention to cap franc strength by buying foreign currencies, and which risks the credibility of the central bank.

      [EUR, USD]
      EUR-USD edged out an eight-day low at 1.0817, marking a third consecutive lower low. Yesterday's German constitutional court ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law, has weighed on the euro (although, crucially, refraining from ruling that the ECB's asset purchase program violate its mandate). 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. Both the ECB and the Fed are pursuing aggressive easing policies, both Europe and the U.S. are facing significant economic headwinds from virus-containing lockdown measures, and both Europe and the U.S. are now pursing economic reopeing strategies.

      [USD, JPY]
      USD-JPY edged out a fresh seven-week low, at 106.21, while EUR-JPY posted a three-year low at 115.06, reflecting increment yen gains, despite the prevailing optimism in global stock markets. Tokyo markets remained closed for Japan's Golden Week holidays, and will reopen tomorrow. We expect the Japanese currency to remain apt to outperformance should the Trump administration follow-through in its threats to take actions with regard to its accusations against China and 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 biggest economies is a real concern for investors.

      [GBP, USD]
      Sterling is steady today after trading mixed over the last day, gaining on the underperforming euro, losing ground to the commodity currencies while settling at near net unchanged levels against the dollar. Cable has been holding a narrow range, centred around 1.2450, which is near to midway levels of the broadly sideways consolidation range the pair has been seeing since early April. The release of final UK PMI survey data yesterday out was of no consequence. Despite the final composite PMI being unexpectedly revised higher, to a reading of 13.8 from the preliminary estimate of 12.9, this is of course not something to be greeted with joy as the revised outcome still marks, by far, a record low since the series started in 1998, having plunged from 36.0 in March and from a reading above 50.0 in February. The BoE's May Monetary Policy Committee meeting is up this week (announcing Thursday), which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE programme and putting in liquidity measures in response to the economic and financial consequences of the pandemic-forced economic lockdown. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now. Large reductions in the central bank's growth and inflation forecasts can taken as a given in the Inflation Report. The UK government is reviewing the UK's lockdown this week, and a decision on whether to commence a phased reopening will be made on Thursday (or possibly Sunday, according to some reports).

      [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 ebbed to the lower 1.40s, though has so far remained above yesterday's five-day low at 1.4006. The Canadian currency, along with other oil-correlating currencies, has been underpinned a continued rise in oil pricers. June WTI crude futures posted a fresh three-week high at $24.55, marking a gain of over 240% from the low seen on April 28th, though prices still remain down by over 72% from the highs seen in January. Goldman Sachs research this week raised its 2021 oil price forecast to $51. The 8% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 4% decline against the euro and near 10% 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.

      XE Currency Blog

      Topics7137 Posts7182
      By XE Market Analysis May 5, 2020 2:54 pm
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        XE Market Analysis Posts: 5061
        XE Market Analysis: Asia - May 05, 2020

        The DXY printed one-week highs of 99.97 into the open on Tuesday, up from the 99.33 low seen in London morning trade. The Dollar pulled back some in early N.Y. trade, later recovering to near unchanged on the session. Incoming data saw the March trade deficit wide, while the services ISM fell less than expected, but still to 11-year lows. Wall Street advanced on hopes for the re-opening of the economy, while Treasury yields ticked up as well. EUR-USD opened at session lows of 1.0830, making its sway to 1.0888 highs before falling back to 1.0835. USD-JPY bucked the trend, falling from early highs near 106.75, later bottoming at 106.47. USD-CAD fell to 1.4008 lows, before recovering to over 1.4060, while GBP-USD topped 1.2480 before sinking to 1.2430 lows. Tomorrow brings the April ADP employment survey, where we expect private payrolls to plunge 20.1 mln.

        [EUR, USD]
        EUR-USD bottomed at 1.0826 into the N.Y. open, later perking up to 1.0887 before falling back to 1.0835 where it has since steadied. The pairing fell from 1.0915 to the lows after Germany's constitutional court gave the ECB three months to tweak the public sector purchase program and thus the central bank's extensive QE measures, ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law. EUR-USD support now comes at the April 29 low of 1.0819.

        [USD, JPY]
        USD-JPY headed to session lows of 106.75, down from opening highs near 106.75, despite risk-on conditions, though still inside of recent trading ranges. The Dollar continues to trade in a mixed fashion, and for the most part in narrow trading bands. Japan's Golden Week holidays have thinned out volumes generally. Support is at Thursday's low of 106.41, with resistance at the Asian session high of 106.90.

        [GBP, USD]
        Cable held within Monday's range, centering around 1.2450, which was near to midway levels of the broadly sideways consolidation range the pair has been seeing since early April. The BoE's May Monetary Policy Committee meeting is up this week, which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE program and putting in liquidity measures in response to the economic and financial consequences of the pandemic-forced economic lock down. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now.

        [USD, CHF]
        EUR-CHF edged up over 1.0555 on Tuesday, as risk-taking levels turned higher 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 touched 1.4008 lows, down from London morning session highs of 1.4095. A near 20% rally in WTI crude has weighed on the pairing, seeing WTI crude prices hit three-week highs of $24.20. The price of Western Canadian Select crude grade has reportedly rebounded over $19/bbl, supportive of the CAD, after trading in negative territory for a few days in the past weeks. Support is now at the 50-day moving average at 1.3966.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis May 5, 2020 7:24 am
          XE Market Analysis's picture
          XE Market Analysis Posts: 5061
          XE Market Analysis: North America - May 05, 2020

          The dollar and yen have risen against most currencies during the European morning, correcting some of the losses seen against the commodity currencies during the Asia-Pacific session. The two currencies, which have broken the recent correlative pattern by rising despite a backdrop of buoyant global stock markets, were the main benefactors of broad euro weakness. EUR-USD dropped to a six-day low at 1.0926, and EUR-JPY to 115.60, also a six-day nadir. This came after Germany's constitutional court gave the ECB three months to tweak the public sector purchase program and thus the central bank's extensive QE measures, ruling that some of the measures the Bundesbank is taking under the ECB's Public Sector Purchase Program are not covered by EU law. Elsewhere, the Canadian dollar and other oil-correlating currencies strengthened on the back of a rise in crude prices. USD-CAD dropped below Monday's low in making a low at 1.4029, with the Canadian dollar advancing for the first time since last Wednesday. June WTI crude futures rose by over 10% in pegging a three-week high at $22.77. Goldman Sachs research raised its 2021 oil price forecast to $51. There is now a large body of analysts anticipating a rebound in oil prices, partly on the view that depleting storage capacity is forcing producers into sizeable output cuts. AUD-USD lifted above its Monday high in making a peak at 0.6462. The RBA left its cash rate unchanged at 0.25%, as had been widely anticipated, while loosening the minimum criteria for purchases of corporate debt under its QE program, which will now include debt rated to BBB-. Weekly jobs data out of Australian was down 7.5%. New Zealand reported no new coronavirus cases for a second day, reaffirming the success both New Zealand and Australian have had in containing the virus, which has prompted talk of a free travel policy between the two nations.

          [EUR, USD]
          EUR-USD has ebbed below its Friday lows in reaching a 1.0923 nadir, retracing some of the gains seen from the April-24th low at 1.0726. Recent gains had been fuelled by a rotation lower in the dollar, which had been concomitant with a risk-on vibe in global markets, underpinned by the sift to reopening from lockdowns in many economies. Increasing tensions between the U.S. and China, with the former blaming the coronavirus pandemic on the latter, and threatening to take measures, including fresh tariffs, have fostered a new phase of risk aversion in global markets, which in turn is now underpinning the dollar against most other currencies, including the euro. EUR-USD remains 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 pair to lack sustained directional bias for now. Both the ECB and the Fed are pursuing aggressive easing policies, both Europe and the U.S. are facing significant economic headwinds from virus-containing lockdown measures, and both Europe and the U.S. are now pursing economic reopeing strategies.

          [USD, JPY]
          USD-JPY has remained heavy, but above Friday's 106.60 low and, in turn, the seven-week low seen last Wednesday at 106.36. The yen, meanwhile, has been trading firmer against the euro, commodity currencies, and most other currencies today, against a risk-off backdrop. Trading conditions have been thin with both Japan and China amid a week-long holiday period. We expect the Japanese currency to remain in the outperforming list with risk aversion taking a grip again amid a combo of weak economic data and, more particularly, the Trump administration's ratcheting up of its accusations about China and the coronavirus pandemic. U.S. Secretary of State Pompeo said on Sunday that there was a "significant amount of evidence" that the virus emerged from a lab in Wuhan. Beijing, via an editorial in the state-controlled Global Times responded by saying that the U.S. was "bluffing." 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 biggest economies is a real concern for investors.

          [GBP, USD]
          Sterling is trading mixed, dropping against a generally firmer dollar while gaining versus an underperforming euro, while holding steady against the yen. Cable posted an intraday low at 1.2421 after tumbling back from the intraday high at 1.2461. In contrast, euro weakness drove EUR-GBP over 0.5% lower, to a four-day low at 0.8708. The release of final UK PMI survey data out was of no consequence. Despite the final composite PMI being unexpectedly revised higher, to a reading of 13.8 from the preliminary estimate of 12.9, this is of course not something to be greeted with joy as the revised outcome still marks -- by far -- a record low since the series started in 1998, having plunged from 36.0 in March and from a reading above 50.0 in February. The BoE's May Monetary Policy Committee meeting is up this week (announcing Thursday), which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE programme and putting in liquidity measures in response to the financial market consequences of the pandemic-forced economic lockdown. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now. Large reductions in the central bank's growth and inflation forecasts can taken as a given in the Inflation Report. The UK's lockdown is set to last through to Thursday, when the government will make a second review. Although the five criteria the government has listed as necessary to be met before a phased reopening can commence (flattening in the infection rate, ability of the health system to cope, increased diagnostic testing capacity etc) look to be nearing accomplishment, Prime Minister Johnson will reportedly extend the lockdown for a third time, although for how long is uncertain. He will also, reportedly, detail a roadmap to economic reopening in the UK.

          [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 dropped below Monday's low in making a low at 1.4029, with the Canadian dollar advancing for the first time since last Wednesday. The Canadian currency, along with other oil-correlating units benefited by June WTI crude futures rising 8% in pegging a three-week high at $22.09. Goldman Sachs research raised its 2021 oil price forecast to $51. Oil prices remain down by over two thirds from the highs seen in early January, marking a significant deterioration in Canada's terms of trade. The near 9% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 6% decline against the euro and near 10% 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.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis May 5, 2020 3:53 am
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: Europe - May 05, 2020

            The dollar ebbed back a little while the commodity currencies lifted moderately as stock markets mustered up gains. Many economies are already in or heading to a phased reopening from lockdowns, while there was a lack of follow-through (so far) on U.S. President Trump's threats against China about the coronavirus. Both Japanese and Chinese remain closed for public holidays. EUR-USD has held a narrow range around 1.0900, and USD-JPY has put in a sub-30 pip range in the mid 106.0s.
            AUD-USD lifted above its Monday high in making a peak at 0.6462. The RBA left its cash rate unchanged at 0.25%, as had been widely anticipated, while loosening the minimum criteria for purchases of corporate debt under its QE program, which will now include debt rated to BBB-. Weekly jobs data out of Australian was down 7.5%. New Zealand reported no new coronavirus cases for a second day, reaffirming the success both New Zealand and Australian have had in containing the virus, which has prompted talk of a free travel policy between the two nations.
            USD-CAD dropped below Monday's low in making a low at 1.4029, with the Canadian dollar advancing for the first time since last Wednesday. The Canadian currency, along with other oil-correlating units benefited by June WTI crude futures rising 8% in pegging a three-week high at $22.09. Goldman Sachs research raised its 2021 oil price forecast to $51. There is a large body of analysts anticipating a rebound in oil prices, partly on the view that depleting storage capacity is forcing producers into sizeable output cuts.
            Switzerland's April CPI data showed a precipitous drop, to -1.1% y/y from -0.5% y/y. The plunge in oil prices and pronounced disinflationary impact of Europe-wide and world-wide lockdowns are at work, though the SNB will also worry about the disinflationary impact stemming from the chronically overvalued Swiss franc, which the central bank has been capping via an informal 1.0500 floor in EUR-CHF during the pandemic crisis period so far.
            UK government minister Hancock reaffirmed the government's position that, in his words, there is "no need" to delay trade discussions with the EU, with the intention of the UK leaving transition membership of the EU's single market at year-end.

            [EUR, USD]
            EUR-USD has held a narrow range around 1.0900, consolidating lower after rising out of the April-24th low at 1.0726. The pair remains 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. Both the ECB and the Fed are pursuing aggressive easing policies, both Europe and the U.S. are facing significant economic headwinds from virus-containing lockdown measures, and both Europe and the U.S. are now pursing economic reopeing strategies.

            [USD, JPY]
            USD-JPY has put in a sub-30 pip range in the mid 106.0s, while the yen has lost ground to the commodity currencies today against a backdrop of buoyant global stock markets. Japanese markets are closed this week for Japan's Golden Week holiday. We expect the Japanese currency to remain apt to outperformance should the Trump administration follow-through in its threats to take actions with regard to its accusations against China and 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 biggest economies is a real concern for investors.

            [GBP, USD]
            Sterling is steadier today after coming under some pressure over the previous couple of sessions. The UK currency has been correlating with global equity market direction, similar to a commodity currency, over the last couple of months. The BoE's May Monetary Policy Committee meeting is up this week (announcing Thursday), which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE programme and putting in liquidity measures in response to the financial market consequences of the pandemic-forced economic lockdown. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now. Large reductions in the central bank's growth and inflation forecasts can taken as a given in the Inflation Report. Data this week is highlighted by the by the release of the final April versions of the services and composite PMI readings (today), along with the April construction PMI report (Wednesday). The UK's final April manufacturing PMI was released last Friday, and was revised lower to 32.6 from 32.9, tumbling from 47.8 in March. The UK's lockdown is set to last through to next Thursday, when the government will make a second review. It's uncertain as yet if a phased reopening of the economy will be announced, though the five criteria the government has listed as necessary to be met (flattening in the infection rate, ability of the health system to cope, increased diagnostic testing capacity etc) look to be nearly achieved.

            [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 dropped below Monday's low in making a low at 1.4029, with the Canadian dollar advancing for the first time since last Wednesday. The Canadian currency, along with other oil-correlating units benefited by June WTI crude futures rising 8% in pegging a three-week high at $22.09. Goldman Sachs research raised its 2021 oil price forecast to $51. Oil prices remain down by over two thirds from the highs seen in early January, marking a significant deterioration in Canada's terms of trade. The near 9% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 6% decline against the euro and near 10% 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.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis May 4, 2020 2:23 pm
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: Asia - May 04, 2020

              The DXY rallied from Asian opening lows of 99.09 to 99.60 highs during the N.Y. session, driven largely by EUR-USD losses. Major Dollar pairing ranges were relatively narrow again, as has been the case of late. For data, the March factory report was weak, but near expectations, resulting in little market impact. Wall Street was lower, with losses driven by ramped up tensions between the U.S. and China on the pandemic blame game, and comments from Warren Buffett over the weekend, who said he did not see any attractive investments currently. Treasury yields moved higher. EUR-USD fell from 1.0943 seen at the open, later falling to 1.0895 lows. USD-JPY peaked at 107.07, later falling back to near opening levels around 106.80. USD-CAD dropped to 1.4051 on oil gains, later steadying near 1.4090. Cable was sideways between 1.2412 and 1.2450.

              [EUR, USD]
              EUR-USD dipped from early highs of 1.0943 to a base of 1.0900 in morning trade. Growing tensions between the U.S. and China, with the former blaming the coronavirus pandemic on the latter, and threatening to take measures, including fresh tariffs, have fostered a new phase of risk aversion in global markets, which in turn is now underpinning the dollar against most other currencies, including the Euro. After the London close, the Euro dipped to 1.0895 lows. The 20-day moving average is the next support level, currently sitting at the 1.0882 mark.

              [USD, JPY]
              USD-JPY rallied from early lows of 106.76, later topping at 107.07 before heading back into 106.80. Quiet conditions prevailed, though the risk-off backdrop put a cap on the pairing. Trade was thin overnight as Japan remained on holiday until Thursday for Golden Week, seeing the pairing range between 106.94 and 106.67. We look for recent ranges to hold up through the first half of the week.

              [GBP, USD]
              Cable fell from Asian opening levels of 1.2495 to 1.2405 lows into the N.Y. open, its lowest level since last Wednesday, and under its 50-day moving average of 1.2432. The Pound has again proved sensitive to the backdrop of falling global stock markets. A survey out today showed that confidence among UK CFOs is the lowest ever recorded (in the Deloitte CFO poll). UK data this week is highlighted by the by the release of the final April reports for the services and composite PMI surveys on Tuesday, along with the April construction PMI report (Wednesday). The UK's lock down is set to last through to Thursday, when the government will make a second review.

              [USD, CHF]
              EUR-CHF pulled back from April highs of 1.0611 seen last Wednesday, as risk-taking levels turned lower again on Monday. 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 1.4051 lows in early North American trade, down from overnight highs of 1.4152. The partial recovery in oil prices supported the CAD, as WTI crude rallied, up over $1/bbl from lows, and trading over $20.00/bbl. The pairing later turned higher, topping at 1.4112. The 20-day moving average at 1.4032 is the next support level, with resistance at the April 23 high of 1.4198.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis May 4, 2020 7:23 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: North America - May 04, 2020

                The dollar has lifted across-the-board on a safe-haven bid against a backdrop of tumbling stock markets in Europe and Asia, and with S&P 500 futures racking up losses of about 1%. Both Japanese and Chinese markets were closed, with both countries an extended public holiday periods. The narrow trade-weighted USD index lifted above its Friday peak in making a high at 99.46, gaining about 0.9% from the lows. EUR-USD has concurrently ebbed below its Friday lows in reaching a 1.0923 nadir, retracing some of the gains seen from the April-24th low at 1.0726. The dollar has similarly gained versus the pound and other currencies, including the commodity currencies, which have been correcting gains seen last week. AUD-USD posted a 10-day low at 0.6373, and USD-CAD printed an 11-day high a 1.4152. Front-moth WTI crude prices fell by over 7% making a low at $18.05 low, having breached its Friday low on route. The out-of-kilter demand/supply balance is keeping a lid on oil prices, although approaching capacity limits in global storage facilities are expected to force oil producers into significant supply cuts. Risk aversion has been stocked by a combo of weak economic data and, more particularly, the Trump administration's ratcheting up of its accusations about China and the coronavirus pandemic. U.S. Secretary of State Pompeo said on Sunday that there was a "significant amount of evidence" that the virus emerged from a lab in Wuhan. Beijing, via an editorial in the state-controlled Global Times responded by saying that the U.S. was "bluffing." 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 biggest economies is nevertheless a concern for investors. A series of April PMI survey data, meanwhile, have been painting a picture of continuing contraction. The manufacturing PMI outcomes of South Korea, Taiwan and Japan, all hit their worse levels since the financial-crisis era of 2009, while the final April Eurozone manufacturing PMI was revised to a record low.

                [EUR, USD]
                EUR-USD has ebbed below its Friday lows in reaching a 1.0923 nadir, retracing some of the gains seen from the April-24th low at 1.0726. Recent gains had been fuelled by a rotation lower in the dollar, which had been concomitant with a risk-on vibe in global markets, underpinned by the sift to reopening from lockdowns in many economies. Increasing tensions between the U.S. and China, with the former blaming the coronavirus pandemic on the latter, and threatening to take measures, including fresh tariffs, have fostered a new phase of risk aversion in global markets, which in turn is now underpinning the dollar against most other currencies, including the euro. EUR-USD remains 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 pair to lack sustained directional bias for now. Both the ECB and the Fed are pursuing aggressive easing policies, both Europe and the U.S. are facing significant economic headwinds from virus-containing lockdown measures, and both Europe and the U.S. are now pursing economic reopeing strategies.

                [USD, JPY]
                USD-JPY has remained heavy, but above Friday's 106.60 low and, in turn, the seven-week low seen last Wednesday at 106.36. The yen, meanwhile, has been trading firmer against the euro, commodity currencies, and most other currencies today, against a risk-off backdrop. Trading conditions have been thin with both Japan and China amid a week-long holiday period. We expect the Japanese currency to remain in the outperforming list with risk aversion taking a grip again amid a combo of weak economic data and, more particularly, the Trump administration's ratcheting up of its accusations about China and the coronavirus pandemic. U.S. Secretary of State Pompeo said on Sunday that there was a "significant amount of evidence" that the virus emerged from a lab in Wuhan. Beijing, via an editorial in the state-controlled Global Times responded by saying that the U.S. was "bluffing." 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 biggest economies is a real concern for investors.

                [GBP, USD]
                Sterling has come under some pressure over the last couple of sessions. The UK currency has been correlating with global equity market direction, similar to a commodity currency, over the last couple of months. The BoE's May Monetary Policy Committee meeting is up this week (announcing Thursday), which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE programme and putting in liquidity measures in response to the financial market consequences of the pandemic-forced economic lockdown. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now. Large reductions in the central bank's growth and inflation forecasts can taken as a given in the Inflation Report. Data this week is highlighted by the by the release of the final April versions of the services and composite PMI readings (Tuesday), along with the April construction PMI report (Wednesday). The UK's final April manufacturing PMI was released on Friday, and was revised lower to 32.6 from 32.9, tumbling from 47.8 in March. The UK's lockdown is set to last through to Thursday, when the government will make a second review. It's uncertain as yet if a phased reopening of the economy will be announced, though the five criteria the government has listed as necessary to be met (flattening in the infection rate, ability of the health system to cope, increased diagnostic testing capacity etc) look to be nearly achieved.

                [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 11-day high a 1.4152. Front-moth WTI crude prices have concurrently fallen by over 7% making a low at $18.10 low, having breached its Friday low on route. The out-of-kilter demand/supply balance is keeping a lid on oil prices, although approaching capacity limits in global storage facilities are expected to force oil producers into significant supply cuts. Oil prices remain down by over 70% from the highs seen in early January, marking a significant deterioration in Canada's terms of trade. The near 9% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 6% decline against the euro and near 10% 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.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis May 4, 2020 4:22 am
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: Europe - May 04, 2020

                  The dollar has lifted across-the-board amid a safe-haven bid against a backdrop of tumbling stock markets in Asia. Trading conditions have been thin with both Japan and China amid a week-long holiday period. The narrow trade-weighted USD index lifted above its Friday peak in making a high at 99.46, gaining about 0.9% from the lows. EUR-USD has concurrently ebbed below its Friday lows in reaching a 1.0926 nadir, retracing some of the gains seen from the April-24th low at 1.0726. The dollar has similarly gained versus the pound and other currencies, including the commodity currencies, which have been correcting gains seen last week. AUD-USD posted a 10-day low at 0.6373, and USD-CAD printed an 11-day high a 1.4152. Front-moth WTI crude prices fell by over 7% making a low at $18.10 low, having breached its Friday low on route. The out-of-kilter demand/supply balance is keeping a lid on oil prices, although approaching capacity limits in global storage facilities are expected to force oil producers into significant supply cuts. Risk aversion is being fed by a combo of weak economic data and, more particularly, the Trump administration's ratcheting up of its accusations about China and the coronavirus pandemic. U.S. Secretary of State Pompeo said on Sunday that there was a "significant amount of evidence" that the virus emerged from a lab in Wuhan. Beijing, via an editorial in the state-controlled Global Times responded by saying that the U.S. was "bluffing." 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 biggest economies is a real concern for investors. A series of April PMI survey data, meanwhile, have been painting a picture of continuing contraction. The manufacturing PMI outcomes of South Korea, Taiwan and Japan, all hit their worse levels since the financial-crisis era of 2009. Other PMI readings have breached below 2009 lows to series-record lows. Similar readings are expected in PMI out of Europe and elsewhere this week.

                  [EUR, USD]
                  EUR-USD has ebbed below its Friday lows in reaching a 1.0926 nadir, retracing some of the gains seen from the April-24th low at 1.0726. Recent gains had been fuelled by a rotation lower in the dollar, which had been concomitant with a risk-on vibe in global markets, underpinned by the sift to reopening from lockdowns in many economies. Increasing tensions between the U.S. and China, with the former blaming the coronavirus pandemic on the latter, and threatening to take measures, including fresh tariffs, have fostered a new phase of risk aversion in global markets, which in turn is now underpinning the dollar against most other currencies, including the euro. EUR-USD remains 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 pair to lack sustained directional bias for now. Both the ECB and the Fed are pursuing aggressive easing policies, both Europe and the U.S. are facing significant economic headwinds from virus-containing lockdown measures, and both Europe and the U.S. are now pursing economic reopeing strategies.

                  [USD, JPY]
                  USD-JPY has remained heavy, but above Friday's 106.60 low and, in turn, the seven-week low seen last Wednesday at 106.36. The yen, meanwhile, has been trading firmer against the euro, commodity currencies, and most other currencies today, against a risk-off backdrop. Trading conditions have been thin with both Japan and China amid a week-long holiday period. We expect the Japanese currency to remain in the outperforming list with risk aversion taking a grip again amid a combo of weak economic data and, more particularly, the Trump administration's ratcheting up of its accusations about China and the coronavirus pandemic. U.S. Secretary of State Pompeo said on Sunday that there was a "significant amount of evidence" that the virus emerged from a lab in Wuhan. Beijing, via an editorial in the state-controlled Global Times responded by saying that the U.S. was "bluffing." 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 biggest economies is a real concern for investors.

                  [GBP, USD]
                  Sterling has come under some pressure over the last couple of sessions. The UK currency has been correlating with global equity market direction, similar to a commodity currency, over the last couple of months. The BoE's May Monetary Policy Committee meeting is up this week (announcing Thursday), which will be accompanied by its quarterly Inflation Report. The central bank has already slashed its policy repo interest rate to near zero while expanding its QE programme and putting in liquidity measures in response to the financial market consequences of the pandemic-forced economic lockdown. As with the Fed and ECB last week, this policy meeting isn't likely to be too eventful, with the policy framework expected to be left unchanged for now. Large reductions in the central bank's growth and inflation forecasts can taken as a given in the Inflation Report. Data this week is highlighted by the by the release of the final April versions of the services and composite PMI readings (Tuesday), along with the April construction PMI report (Wednesday). The UK's final April manufacturing PMI was released on Friday, and was revised lower to 32.6 from 32.9, tumbling from 47.8 in March. The UK's lockdown is set to last through to next Thursday, when the government will make a second review. It's uncertain as yet if a phased reopening of the economy will be announced, though the five criteria the government has listed as necessary to be met (flattening in the infection rate, ability of the health system to cope, increased diagnostic testing capacity etc) look to be nearly achieved.

                  [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 11-day high a 1.4152. Front-moth WTI crude prices have concurrently fallen by over 7% making a low at $18.10 low, having breached its Friday low on route. The out-of-kilter demand/supply balance is keeping a lid on oil prices, although approaching capacity limits in global storage facilities are expected to force oil producers into significant supply cuts. Oil prices remain down by over 70% from the highs seen in early January, marking a significant deterioration in Canada's terms of trade. The near 9% year-to-date weakening in the Canadian dollar versus the U.S. dollar, along with the near 6% decline against the euro and near 10% 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.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis May 1, 2020 3:20 pm
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5061
                    XE Market Analysis: Asia - May 01, 2020

                    The Dollar stumbled early in the N.Y. session on Friday, taking the DXY to one-month lows of 98.79. The USD later perked up some, with short covering into the weekend reported. Incoming data was weak, though better than consensus forecasts. The April manufacturing ISM came in at 41.5, while March construction spending rose, against forecasts for a decline. the data had only fleeting impact on the FX market. Wall Street was sharply lower, following Trump threats to impose new tariffs on China goods. Treasury yields were fractionally lower. EUR-USD printed one-month highs of 1.1019, up from 1.0971 lows, while USD-JPY made its way from 106.60 to 107.08. USD-CAD topped at 1.4109 from 1.4009 lows. Cable slipped to 1.2486 from mid-session highs of 1.2546.

                    [EUR, USD]
                    EUR-USD topped at one-month highs of 1.1019 in mid-morning trade, up from opening lows of 1.0971. Unlike the dollar versus the Yen, which got a brief boost following the less weak than expected ISM and construction data, the Euro headed higher after the data. The ECB's failure to add further stimulus at its meeting on Thursday, along with the Fed's massive easing moves has supported the EUR this week, and the market will now eye the 200-day moving average at 1.1035.

                    [USD, JPY]
                    USD-JPY rallied to session highs of 107.08 following the upside surprises for both the manufacturing ISM and construction spending data, up from early lows of 106.60. The pairing has since pulled back under 106.75, as risk-off conditions deepen following Trump escalating his accusations against China about the coronavirus outbreak, including threatening new tariffs. This said, USD-JPY remains inside of Thursday's trading range, and has stuck to a band of 108.04 to 106.36 for the past two-plus weeks.

                    [GBP, USD]
                    Sterling came under some pressure today, giving back gains seen on Thursday. The Pound has been correlating with global equity market direction, similar to a commodity currency, over the last couple of months. Cable shed about 0.5% in posting a low at 1.2486 after the London close, which retraces about half of Thursday's gain.

                    [USD, CHF]
                    EUR-CHF pulled back from April highs of 1.0611 seen on Wednesday, as risk-taking levels turned lower again on Friday. 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 has rallied to one-week 1.4103 highs, after printing six-week lows of 1.3850 on Thursday. Trump's threat to slap more tariffs on trade with China has weighed on the trade-sensitive CAD, while WTI crude prices, still higher than Thursday's close, but well off session highs over $20.00/bbl have supported USD-CAD as well. The pairing is over both its 50-day moving average at 1.3935, and its 20-day moving average at 1.4034.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis May 1, 2020 7:19 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: North America - May 01, 2020

                      The yen has outperformed while commodity currencies have underperformed amid a sharp phase of risk-off positioning. The dollar traded mixed, losing ground to the yen and euro, among other currencies, while gaining on the Australian and Canadian dollars, among others. U.S. President Trump soured the mood in equity markets, raising his accusations against China about the coronavirus outbreak, threatening new tariffs. Sources cited by Reuters said that a range of options against China were being discussed, but considerations were at an early stage. The S&P 500 closed on Wall Street yesterday with a 0.9% decline, which capped out the best month the index has seen since 1987 as shares rebounded from the deep declines that were seen in March. Trading in S&P 500 futures have seen losses accelerate, racking up declines of over 2% in the overnight session. Trading conditions have been thinned by the absence of many European and other countries, including China, for May Day holidays. Final PMI survey data out of the UK, Japan and Australia reaffirmed the dismal economic picture due to the lockdowns. The biggest mover out of the main currencies has been the Australian dollar, which dropped by over 1% in posting a three-day low at 0.6438 against the U.S. dollar. AUD-JPY dove by nearly 1.5%. The Kiwi dollar also came under pressure, while USD-CAD lifted by over 0.7% in printing a three-day high at 1.4044. Elsewhere, EUR-USD tested mid-Aprils highs at 1.0990-91. USD-JPY declined by nearly 0.5% in printing a low at 106.74, which retraces over two thirds of the gain seen yesterday.

                      [EUR, USD]
                      EUR-USD has tested the mid-April highs at 1.0990-91, which, if breached, would put the paring in one-month high territory. Today marks the third consecutive higher high for EUR-USD, driven once again by a broad softening in the dollar, although the euro has seen concurrent strength against some other currencies, including the pound and the underperforming commodity currencies. The action is coming in a thin London interbank market, with participation depleted by the absence of many European countries for May Day holidays. The the dollar is also weakening despite quite sharp declines in equity markets, breaking with the recent correlation. EUR-USD is now back to near the tep back toward 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. The ECB yesterday left the overall policy framework unchanged at the conclusion of its monthly policy meeting, but announced further liquidity-boosting measures. The move was a little more than markets had anticipated, which consequently weighed on the euro, though the common currency quickly bounced back against the dollar and other currencies. Obviously the same lockdown-related economic headwinds are bearing down on the U.S. and other countries, limiting the divergence in central bank policy and scope for directional currency gyrations.

                      [USD, JPY]
                      The yen has traded firmer against the dollar and other most currencies, especially versus underperforming commodity currencies today, which have come under pressure after U.S. President Trump soured the mood in global equity markets by escalating his accusations against China about the coronavirus outbreak, including threatening new tariffs. This has stimulated safe haven demand for the Japanese currency. USD-JPY declined by nearly 0.5% in printing a low at 106.74, which retraces over two thirds of the gain seen yesterday. Japan's final April manufacturing PMI confirmed a fall to 41.9 from 44.8 in the month prior, which is the lowest level seen since April 2009. The BoJ released the minutes from its policy meeting, held on Monday, which didn't offer too much insight, noting, for instance, that the damage from the pandemic could be "enormous." The BoJ this week delivered on expectations in announcing that JGB purchases can now be unlimited (formerly capped at Y80 tln per year) while also announcing an increase in corporate bond and commercial paper. The yen wasn't impacted, with the move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases.

                      [GBP, USD]
                      Cable lifted to a 1.2486 high on the back of dollar softness. Sterling remains up by an averaged 1% versus the dollar, euro and yen from week-ago levels, reflecting its correlation with global stock market performance. The UK currency has been apt to perform similar to other "risk-off" currencies, such as commodity currencies, during the pandemic crisis, with the combo of the UK's open economy, current account deficit and outsized financial sector, making the currency sensitive to swings in risk appetite in global markets. With the global rate of coronavirus inflection in decline, and major economies starting a phased reopening (and while the UK remains in lockdown, the UK Treasury is reportedly drawing up measures to "get Britain back to work," including plans for "Covid-secure offices), the tide looks to be shifting, though this assumes that the reopening can be done without causing a second wave of infections. This backdrop should help support the pound, though the continued risk for the UK leaving the post-Brexit transition membership of the EU's single market at the end of the year should curtail upside potential.

                      [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. Total sight deposits rose by CHF 28.6 bln over the last four weeks, at a diminishing rate (rising by just 3 bln in the last week, through to April 16th) as the demand for the Swiss currency as a safe haven tapered off. 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 lifted by over 0.7% in printing a three-day high at 1.4043. The Canadian dollar has followed other commodity currencies lower today, after U.S. President Trump soured the mood on global equity markets by ratcheting up his accusations against China about the coronavirus pandemic. June WTI crude future came under pressure, though not before posting a two-week high at $20.45. Crude prices subsequently ebbed back back under $20. While oil prices have doubled in less than a week, prices remain down by about 70% from the highs seen in early January, marking a significant deterioration in Canada's terms of trade.

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