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By XE Market Analysis May 1, 2020 4:49 am
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    XE Market Analysis Posts: 5061
    XE Market Analysis: Europe - May 01, 2020

    The commodity currencies have come under pressure after U.S. President Trump soured the mood in equity markets, raising his accusations against China about the coronavirus outbreak, threatening new tariffs while, according to an unnamed source connected to the White House cited by Bloomberg, considering blocking a government fund -- the Thrift Savings Plan (which is the federal government's retirement savings fund -- from investing in Chinese equities. 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% so far in the overnight session. Trading conditions have been thinned by the absence of Singapore, China and Hong Kong, which have been closed today for Labour Day holidays, and with many European countries also taking the day off. Final PMI survey data out of 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 nearly 1% in posting a three-day low at 0.6446 against the U.S. dollar. The Kiwi dollar also came under pressure, while USD-CAD lifted by over 0.6% in printing a three-day high at 1.4027, despite oil prices rising to a two-week high. Elsewhere, EUR-USD has been rooting in the mid 1.09s, holding below yesterday's 16-day at 1.0937. USD-JPY has been holding a narrow range in the lower 107.0s. Sterling has come under pressure, giving back gains seen yesterday. The UK currency has been correlating with global equity market direction, similar to a commodity currency, over the last couple of months.

    [EUR, USD]
    EUR-USD has been rooted in the mid 1.09s, holding below yesterday's 16-day at 1.0937. The high was a product of a broad rotation low in the dollar, which has been under pressure over the last week amid an improving risk appetite in global markets, underpinned by the prospect of reopening economies. Sentiment has soured over the last day, however, with President Trump ramping up his campaign against China and allegations of its role in the coronavirus epidemic, which in turn has returned some support to the dollar. The ECB yesterday left the overall policy framework unchanged at the conclusion of its monthly policy meeting, but announced further liquidity-boosting measures: specifically a 25 bps cut of targetted long-term refinancing operations, known as TLTROs III, and the creation of a non-targetted pandemic emergency long-term refinancing operations, known as PELTROs. 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. For this reason the deluge of data out of the Eurozone yesterday had little impact, which included worse than expected German jobless total in April, a 3.8% contraction in Eurozone Q1 GDP, and a slightly less benign reading in April Eurozone HICP inflation (though still falling to a 0.4% y/y rate from 0.7% y/y in March). Incoming U.S. data has been painting a similar picture. EUR-USD looks likely to continue to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU.

    [USD, JPY]
    USD-JPY has been holding a narrow range in the lower 107.0s. The yen, meanwhile, has gained versus the underperforming commodity currencies today, which have come under pressure after U.S. President Trump soured the mood in equity markets by escalating his accusations against China about the coronavirus outbreak, including threatening new tariffs. 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. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies, which should keep the yen on a steady-to-softening track.

    [GBP, USD]
    Sterling has come under some pressure today, giving back gains seen yesterday. The UK currency 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 1.2535, which retraces about half of yesterday's gain. We have been arguing that with many economies reopening, or heading for reopening, that the worst looks to be over for the pound, which underperformed during the more acute risk-off phases over the last couple of months, although the continued risk for the UK leaving the post-Brexit transition membership of the EU's single market at the end of the year is likely to curtail upside potential. The pound remains down on the year-to-date by an averaged 5% versus the dollar, euro and yen.

    [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 0.6% in printing a three-day high at 1.4027, despite oil prices rising to a two-week high. This comes with the Canadian dollar following 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, though we expect the Canadian dollar's correlative break from oil prices to be temporary (or, indeed, oil price break with global stock markets). June WTI crude future posted a two-week high at $20.45, though has since ebbed 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, which marks a significant deterioration in Canada's terms of trade.

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    Topics7137 Posts7182
    By XE Market Analysis April 30, 2020 2:49 pm
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      XE Market Analysis Posts: 5061
      XE Market Analysis: Asia - Apr 30, 2020

      After an early attempt to rally, the Dollar headed lower against the Euro and Pound in particular, taking the DXY to near three-week lows of 98.92. Much weaker incoming U.S. data, including another huge increase in jobless claims, and a plunge in earnings and consumption were drivers of USD weakness, though month-end flows were noted as well. Wall Street tanked on the back of the data, while safe-haven Treasuries remained in demand. EUR-USD spiked to 1.0972 from lows of 1.0833. USD-JPY rallied to 108.22 from 106.45, while USD-CAD topped near 1.3960, up from 1.3860 at the open. Cable rose over 1.2640 from early lows of 1.2476.

      [EUR, USD]
      EUR-USD dipped to 1.0833 from over 1.0880 following the ECB announcement, which left rates unchanged, as expected. The Bank remained focused on liquidity provisions, with no additional asset purchases in the mix. This saw European stock markets heading lower. EUR-USD later rallied from the lows, trading to two-week highs of 1.0972. The pairing has since steadied over 1.0940. The rally came as the ECB didn't go as far as some expected with regards to further stimulative moves, while weak U.S. data weighed on the Dollar. In addition, talk of month-end flows into the Euro was heard, while waning optimism for a quick U.S. recovering has weighed on the USD.

      [USD, JPY]
      USD-JPY rallied to 107.22 highs, up from lows of 106.45, despite general USD weakness, prompted by very weak U.S. data. Risk-off conditions generally weigh on the pairing, though today, there have been reports of month end flows out of the Yen, with the Dollar proceeds heading into U.S. Treasuries. Tuesday's high of 107.34 marks the next resistance level, with support at Wednesday's low of 106.36.

      [GBP, USD]
      Cable printed 15-day highs of 1.2643 in N.Y. morning trade. Dollar weakness following the run of horrible U.S. data was the main driver of the move higher. The 200-day moving average, currently at the 1.2647 level is the next major resistance level. We have been arguing that with many economies reopening, or heading for reopening, that the worst looks to be over for the Pound, which underperformed during the more acute risk-off phases over the last couple of months.

      [USD, CHF]
      EUR-CHF pulled back from April highs of 1.0611 seen on Wednesday, as risk-taking levels turned lower again. 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 hit six-week lows of 1.3850 ahead of the North American open, the move driven by WTI oil prices which surged to one-week highs over $18.00/bbl. The pairing later recovered to 1.3959 highs, as WTI crude gave back gains, falling to lows under $16.70, as risk-off conditions returned. After trading under 50-day moving average, currently at 1.3917, the pairing was set to close the session above the level.

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      Topics7137 Posts7182
      By XE Market Analysis April 30, 2020 7:18 am
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        XE Market Analysis Posts: 5061
        XE Market Analysis: North America - Apr 30, 2020

        The Canadian dollar posted a fresh high as oil prices continued to surge, while most other currencies have traded with little direction so far today, into the ECB's policy announcement and the weekly economic reality check of U.S. jobless claims data. USD-CAD printed a seventeen-day low at 1.3857, as June WTI crude futures rallied by over 16% in posting a six-day high at $17.80. WTI benchmark prices are now up by over 76% from the near $10 low seen earlier in the week. This follows weekly U.S. inventory data yesterday showing a less-than-expected pick-up in inventories, while data showed a rise in gasoline demand in the U.S, new of which comes with many analysts expecting a sizeable forced supply reduction as crude storage facilities reach capacity. This has boosted oil-correlating currencies. Elsewhere, narrow ranges have been prevailing in currency market. Stock markets have be volatile, with Asian markets rallying while European markets have declined. The narrow trade-weighted USD index, edged out a 15-day low at 99.40. EUR-USD posted a two-week high at 1.0891. A deluge of data was released out of the Eurozone, which included worse than expected German jobless total in April, a 3.8% contraction in Eurozone Q1 GDP, and a slightly less benign reading in April Eurozone HICP inflation (though still falling to a 0.4% y/y rate from 0.7% y/y in March). The ECB policy announcement is up next, though, like the Fed yesterday, the outcome is expected to be relatively uneventful, although an expansion in its QE program is possible, while "do what it takes" guidance is a given. Weekly U.S. initial jobless claims data is up later, a metric which has been the main data point showing the impact of lockdowns on the world's biggest economy. Claims are expected to remain hyper-elevated, though should moderate to 3.0 mln, down from the prior 4.427 mln.

        [EUR, USD]
        The euro has been little affected by the deluge of data out of the Eurozone, which included worse than expected German jobless total in April, a 3.8% contraction in Eurozone Q1 GDP, and a slightly less benign reading i April Eurozone HICP inflation (though still falling to a 0.4% y/y rate from 0.7% y/y in March). The ECB policy announcement is up next, though, like the Fed yesterday, the outcome is expected to be relatively uneventful, although an expansion in its QE program is possible, while "do what it takes" guidance is a given. Weekly U.S. initial jobless claims data is up later, a metric which has been the main data point showing the impact of lockdowns on the world's biggest economy. Claims are expected to remain hyper-elevated, though should moderate to 3.0 mln, down from the prior 4.427 mln. Market participants will be paying close attention to reopening economies given the risk of a second wave of coronavirus infection. The emerging strategy in Europe and other nations appears to be titrating (measuring) the degree of societal openness combined with virus-containing measures (hygiene, social distancing, face masks etc) against the health system's ability to cope with ongoing coronavirus infections, and making adjustments to the degree of openness accordingly, as things develop. EUR-USD looks likely to continue to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU. The sharp narrowing in the dollar's yield advantage that was seen in March, when the Fed reversed all rate hikes it make from late 2015 through to last year, came to a pause in early April, with Treasury/Bund yield differentials having since been holding steady.

        [USD, JPY]
        The yen has been trading mixed amid a backdrop of cautious optimism in global markets. USD-JPY carved out a fresh six-week low at 106.40, driven by a continued phase of dollar softness and racking up today as the sixth consecutive day of declines. EUR-JPY printed a three-year low, though the yen has been trading more neutrally versus many other currencies, and has hit a seven-month low against the outperforming Australian dollar. Note that Japan was closed for a public holiday today. The BoJ this week delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies.

        [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 has declined to a seventeen-day low at 1.3857, driving by gains in the Canadian dollar, which has been buoyed by another large rally in oil prices. June WTI crude futures were showing a gain of about 14% in making a six-day high at $17.38. WTI benchmark prices are now up 68% from the near $10 low seen earlier in the week. Weekly U.S. inventory data yesterday showed a less-than-expected pick-up in inventories, while data showed a rise in gasoline demand in the U.S., which drove a decline-from-record-highs in gasoline stockpiles in the latest reporting week. This along with an expected forced large global production cutback, due to diminishing storage space, have given the beleaguered oil market an underpinning, which in turn has given a prop to oil-correlating currencies such as the Canadian dollar. The reopening of some economies, and expectations for more reopenings, should also lift crude demand. We are bearish of USD-CAD, anticipating a return to levels around 1.3500 over the coming weeks.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis April 30, 2020 4:18 am
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          XE Market Analysis Posts: 5061
          XE Market Analysis: Europe - Apr 30, 2020

          Narrow ranges have been prevailing in currency markets so far today, despite a rally in global stock markets on news of positive partial results from a trial of Gilead's antiviral Remdesivir drug, which showed it could speed up the recovery from Covid 19. The news saw Wall Street rally and the MSCI Asia-Pacific equity index, having now racked up a weekly gain of over 5%, hit a seven-week high. Some market narratives have also highlighted the rapid development of a potential coronavirus vaccine at Oxford University, which has already started testing a candidate vaccine in humans. South Korea also reported no new coronavirus cases for the first time since late February, when cases in the country peaked. Currency market participants have remained cautious, with the main pairing and cross rates holding narrow ranges. The narrow trade-weighted USD index, which has been weakening in recent sessions, steadied at levels just above 99.50, above the 15-day low seen on Tuesday at 99.45. EUR-USD has posted a sub-30 pip range so far today in the mid 1.0800s, and USD-JPY has plied a sideways range above the six-week low seen yesterday at 106.36. The commodity currencies, recent outperformers, have also been in sideways mode. The ECB policy meeting dominates the remainder of today's calendar, though like the Fed yesterday, the outcome is expected to be relatively uneventful, although an expansion in its QE program is possible. Market participants will be paying close attention to reopening economies given the risk of a second wave of coronavirus infection. The emerging strategy in Europe and other nations appears to be titrating (measuring) the degree of societal openness combined with virus-containing measures (hygiene, social distancing, face masks etc) against the health system's ability to cope with ongoing coronavirus infections, and making adjustments to the degree of openness accordingly, as things develop.

          [EUR, USD]
          EUR-USD has posted a sub-30 pip range so far today in the mid 1.0800s. The ECB policy meeting dominates the remainder of today's calendar, though like the Fed yesterday, the outcome is expected to be relatively uneventful, although an expansion in its QE program is possible. Weekly U.S. Initial jobless claims data, which has been the main data point showing the impact of lockdowns on the world's biggest economy, is also up today. Claims are expected to remain hyper-elevated, though should moderate to 3.0 mln, down from the prior 4.427 mln. Market participants will be paying close attention to reopening economies given the risk of a second wave of coronavirus infection. The emerging strategy in Europe and other nations appears to be titrating (measuring) the degree of societal openness combined with virus-containing measures (hygiene, social distancing, face masks etc) against the health system's ability to cope with ongoing coronavirus infections, and making adjustments to the degree of openness accordingly, as things develop. The sharp narrowing in the dollar's yield advantage that was seen in March, when the Fed reversed all rate hikes it make from late 2015 through to last year, came to a pause in early April, with Treasury/Bund yield differentials having since been holding steady. EUR-USD looks likely to continue to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU.

          [USD, JPY]
          USD-JPY has plied a sideways range so far today above the six-week low seen yesterday at 106.36. Narrow ranges have been prevailing in currency markets, despite a rally in global stock markets on news of positive partial results from a trial of Gilead's antiviral Remdesivir drug, which showed it could speed up the recovery from Covid 19. The news saw Wall Street rally and the MSCI Asia-Pacific equity index, having now racked up a weekly gain of over 5%, hit a seven-week high. South Korea also reported no new coronavirus cases for the first time since late February, when cases in the country peaked. Market participants will be paying close attention to reopening economies given the risk of a second wave of coronavirus infection. The BoJ this week delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies, which should keep the yen on a steady-to-softening track.

          [GBP, USD]
          Cable has settled in a narrow range in the mid 1.2400s. Sterling remains up by an averaged 1% versus the dollar, euro and yen from levels seen at the start of last week, 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 has declined to a seventeen-day low at 1.3857, driving by gains in the Canadian dollar, which has been buoyed by another large rally in oil prices. June WTI crude futures were showing a gain of about 14% in making a six-day high at $17.38. WTI benchmark prices are now up 68% from the near $10 low seen earlier in the week. Weekly U.S. inventory data yesterday showed a less-than-expected pick-up in inventories, while data showed a rise in gasoline demand in the U.S., which drove a decline-from-record-highs in gasoline stockpiles in the latest reporting week. This along with an expected forced large global production cutback, due to diminishing storage space, have given the beleaguered oil market an underpinning, which in turn has given a prop to oil-correlating currencies such as the Canadian dollar. The reopening of some economies, and expectations for more reopenings, should also lift crude demand. We are bearish of USD-CAD, anticipating a return to levels around 1.3500 over the coming weeks.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis April 29, 2020 3:17 pm
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: Asia - Apr 29, 2020

            The Dollar attempted to rally early in the N.Y. session on Wednesday, though later eased on the back of a weaker Q1 GDP report, and as risk-on conditions prevailed following reports that Gildead's remdesivir virus drug had potential against the pandemic. Wall Street rallied sharply on the news. The dollar held steady following the FOMC announcement, where policy was left unchanged, as widely expected. The statement said "The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals". EUR-USD was steady just under 1.0850, after ranging between 1.0862 and 1.0842, while USD-JPY idled just under 107.70, after topping at 106.72, and basing at 106.47 at the open. USD-CAD slipped to 1.3912 lows, as oil prices ran up as much as 30%. Cable rallied from 1.2383 to 1.2451, later settling near 1.2430.

            [EUR, USD]
            EUR-USD eased from early highs of 1.0868, later bottoming at 1.0843 as risk-on conditions prevailed following news that a NIAID study showed positive results for Gilead Science's remdesivir coronavirus drug. The pairing subsequently steadied inside of 1.0845-60. The FOMC announcement, which was as-expected had little impact on the pairing, and the ECB's on Thursday will not likely impact EUR-USD much impact either, as both banks are in full bore ease mode, and will likely remain that way for some time.

            [USD, JPY]
            USD-JPY recovered some from the six-week low of 106.36 seen in London morning trade, peaking at 106.76 following the report that Gilead Science's Remdesivir coronavirus drug may help tame the pandemic. The pairing has since idled inside of 106.70 to 106.50. Risk-on conditions will likely limit USD-JPY downside for today, though the Fed's massive stimulus, including rate cuts to near zero have seen some Yen repatriation since the start of April. Ultra loose U.S. monetary policy can be expected to keep the USD under pressure going forward, which could bring the key USD-JPY 100.00 level into focus.

            [GBP, USD]
            Cable lifted to a 1.2451 in early N.Y. on the back of general USD weakness. The pairing later bottomed at 1.2410, before steadying on either side of 1.2430. With the global rate of coronavirus infection in decline, and major economies starting a phased reopening (and while the UK remains in lock down, the UK Treasury is reportedly drawing up measures to "get Britain back to work"), 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]
            EUR-CHF traded through its 50-day moving average, on its way to April highs of 1.0611 on Wednesday, as risk-taking levels soared. 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 printed better than two-week lows of 1.3912, down from early Asian session highs of 1.4003. The move lower came on the back of the 25% rally in WTI crude prices, and the overall risk-on backdrop, which came on news that a NIAID study showed positive results for Gilead Science's remdesivir coronavirus drug. The pairing later bounced modestly over 1.3940. Support now comes at 1.3905, which represents the 50-day moving average.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis April 29, 2020 7:17 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: North America - Apr 29, 2020

              The dollar has been trading with a softening bias so far today amid a backdrop of overall perky, but cautious global stock markets, with the commodity currencies continuing to outperform while the likes of the euro, sterling and yen left somewhere in the middle. Stock markets mostly gain in Asia and Europe, though European markets pared gains into the Fed's policy announcement later. Oil prices have also gained roughly 40% from yesterday's nadir. Incoming Q1 GDP reports are largely being overlooked, being too backward looking. The narrow trade-weighed USD index ebbed to a low at 99.54 after closing yesterday in New York at 99.87. Yesterday's two-week low at 99.45 has so far been left untroubled. EUR-USD lifted over 50 pips to a high of 1.0874, though remained below yesterday's nine-day high at 1.0890. USD-JPY carved out a fresh six-week low at 106.36, racking up today as the sixth consecutive day of declines. EUR-JPY printed a three-year low, though the yen has been trading more neutrally versus many other currencies, and has hit a seven-month low against the outperforming Australian dollar. Note that Japan was closed for a public holiday today. AUD-USD gained over 0.7% in posting a seven-week high at 0.6547. Australia's Q1 GDP number came in a tad higher than expected at 0.3% q/q in the headline rate. Optimism has been prevailing, overall, on hopes that the reopening of some economies, and the planned reopening in other economies, and hopes that, with sufficient measures, such as social distancing, protective equipment (masks, which, for instance, will be mandatory on Italian public transport), along with the rapid deployment of diagnostic and serological testing, the reopenings will be feasible without causing a second wave of coronavirus infections.

              [EUR, USD]
              EUR-USD has lifted about 0.5% on the back of a softer dollar, which has weakened concomitantly with a rise in European stock markets and U.S. index futures. The pair has printed a high at 1.0886, which is a six-day peak, further extending the rebound from last Friday's one-month low at 1.0726. This puts the EUR-USD a step 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. This week's policy meetings at the ECB (announcing Thursday) and Fed (announcing Wednesday) aren't expected to impart much directional impact EUR-USD, with both central banks already pursuing aggressive loose monetary policies and with neither expected to alter prevailing settings (other than perhaps an extension of the new emergency bond buying program in the case of the ECB) while repeating "do what it takes" guidance. The sharp narrowing in the dollar's yield advantage that was seen in March, when the Fed reversed all rate hikes it make from late 2015 through to last year, came to a pause in early April, with Treasury/Bund yield differentials having since holding steady. The pairing looks likely to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU.

              [USD, JPY]
              The yen has been trading mixed amid a backdrop of cautious optimism in global markets. USD-JPY carved out a fresh six-week low at 106.40, driven by a continued phase of dollar softness and racking up today as the sixth consecutive day of declines. EUR-JPY printed a three-year low, though the yen has been trading more neutrally versus many other currencies, and has hit a seven-month low against the outperforming Australian dollar. Note that Japan was closed for a public holiday today. The BoJ this week delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies.

              [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 has printed a two-week low at 1.3926 in what is now the third consecutive day of decline. A 40%-odd gain in WTI oil prices out of yesterday's $10.07 low, to levels back above $15.00, has helped keep the Canadian dollar buoyed. There are bullish oil arguments taking hold in market narratives, or at least a view for oil prices to stabilize. Goldman Sachs research, for instance, concluded last week that global oil storage capacity would be reached within three or four weeks, which, once realized, would force a 20% cut in production. Such a cut would be tantamount fo 18-20 mln barrels per day, which would be on top of the 9.7 mln barrels per day cut by OPEC++ nations, which takes effect on May 1st. GS estimated it would take between four and eight weeks for crude to base, noting that the production cuts won't be easy to reverse, which in turn would risk there being a supply deficit. The reopening of some economies, and expectations for more reopenings, should also lift demand. We are bearish of USD-CAD, anticipating a return to levels around 1.3500 over the coming weeks.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis April 29, 2020 3:47 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: Europe - Apr 29, 2020

                The dollar has been trading with a softening bias so far today amid a backdrop of overall perky global stock markets, with the commodity currencies continuing to outperform while the likes of the euro, sterling and yen left somewhere in the middle. The risk-on vibe has been fed by the reopening of some economies, and the planned reopening in other economies, and hopes that, with sufficient measures, such as social distancing, protective equipment (masks, which, for instance, will be mandatory on Italian public transport), along with the rapid deployment of diagnostic and serological testing, that the reopenings will be feasible without causing a second wave of coronavirus infections. A 12% rally in oil prices amid hopes for increased demand in the coming months has also been in the mix of sentiment influences today. The release of Q1 GDP data out of various countries are largely being overlooked, being too backward looking. The narrow trade-weighed USD index ebbed to a low at 99.62 after closing yesterday in New York at 99.87. Yesterday's two-week low at 99.45 has so far been left untroubled. EUR-USD lifted over 40 pips to a high of 1.0857, though remained comfortably below yesterday's nine-day high at 1.0890. USD-JPY carved out a fresh six-week low at 106.51, racking up today as the sixth consecutive day of declines. EUR-JPY printed a three-year low, though the yen has been trading more neutrally versus many other currencies, and has hit a seven-month low against the outperforming Australian dollar. Note that Japan was closed for a public holiday today. AUD-USD gained over 0.7% in posting a seven-week high at 0.6547. Australia's Q1 GDP number came in a tad higher than expected at 0.3% q/q in the headline rate.

                [EUR, USD]
                EUR-USD lifted over 40 pips to a high of 1.0857, though remained comfortably below yesterday's nine-day high at 1.0890. This price action has come with the narrow trade-weighed USD index ebbing to a low at 99.62 after closing yesterday in New York at 99.87. The gains that EUR-USD has seen this week as put the pair a step 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. This week's policy meetings at the ECB (announcing Thursday) and Fed (announcing later today) aren't expected to impart much directional impact EUR-USD, with both central banks already pursuing aggressive loose monetary policies and with neither expected to alter prevailing settings (other than perhaps an extension of the new emergency bond buying program in the case of the ECB) while repeating "do what it takes" guidance. The sharp narrowing in the dollar's yield advantage that was seen in March, when the Fed reversed all rate hikes it make from late 2015 through to last year, came to a pause in early April, with Treasury/Bund yield differentials having since been holding steady. EUR-USD looks likely to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU.

                [USD, JPY]
                The yen has been trading mixed amid a backdrop of cautious optimism in global markets. USD-JPY carved out a fresh six-week low at 106.51, driven by a continued phase of dollar softness and racking up today as the sixth consecutive day of declines. EUR-JPY printed a three-year low, though the yen has been trading more neutrally versus many other currencies, and has hit a seven-month low against the outperforming Australian dollar. Note that Japan was closed for a public holiday today. The BoJ this week delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies.

                [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 has printed a two-week low at 1.3930 in what is now the third consecutive day of decline. A 39% gain in WTI oil prices out of yesterday's $10.07 low has helped keep the Canadian dollar buoyed. There are bullish oil arguments taking hold in market narratives, or at least a view for oil prices to stabilize. Goldman Sachs research, for instance, concluded last week that global oil storage capacity would be reached within three or four weeks, which, once realized, would force a 20% cut in production. Such a cut would be tantamount fo 18-20 mln barrels per day, which would be on top of the 9.7 mln barrels per day cut by OPEC++ nations, which takes effect on May 1st. GS estimated it would take between four and eight weeks for crude to base, noting that the production cuts won't be easy to reverse, which in turn would risk there being a supply deficit. The reopening of some economies, and expectations for more reopenings, should also lift demand. We are bearish of USD-CAD, anticipating a return to levels around 1.3500 over the coming weeks.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis April 28, 2020 2:46 pm
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: Asia - Apr 28, 2020

                  The DXY recovered from the two-week lows of 99.45 seen into the Tuesday N.Y. open, rallying back to 99.94 through the morning session. Today's economic reports were mixed, with the current April consumer confidence and Richmond Fed headline indexes dropping sharply, but each showed gains for the 6-month figures. Wall Street was mixed, with the NASDAQ underperforming, as tech stocks were hit. Treasury yields were lower. EUR-USD dipped from 1.0888 to 1.0825 lows, while USD-JPY rallied t 106.97 from 106.57. USD-CAD fell ahead of the open as oil prices rallied,, bottoming at 1.3936, later rebounding to just over 1.4000. GBP-USD headed from early highs over 1.2510 to a 1.2421. The FOMC policy announcement is due at 14:00 EDT on Wednesday. We think further rate cuts into negative territory are off the table, given both internal and public opposition for now, leaving little room for any policy changes at the meeting. The market will focus closely on the statement and ensuing press conference for signals regarding future policy options, including further portfolio expansion or forward guidance.

                  [EUR, USD]
                  EUR-USD rallied to seven-session highs of 1.0888 at the N.Y. open, before spending the remainder of the morning slipping to 1.0825 lows. The pairing has maintained about a 1.0750 to 1.0900 trading range for nearly two-weeks now, with directional changes coming based on the risk backdrop of the day. More of the same appears to be in the cards for now. The FOMC announcement on Wednesday and the ECB's on Thursday will not likely impact EUR-USD much, as both banks are in full bore ease mode, and will likely remain that way for some time.

                  [USD, JPY]
                  USD-JPY hit better than one-month lows of 106.56 into the N.Y. open, after trading a narrow band over 107.20 overnight. The decisive break below the 107.00 level (Monday's low was 106.99) brought sell-stops to bear, which saw follow-through selling to the lows of the session. Since then, with risk taking levels more or less neutral on the day, USD-JPY has made its way to 106.97 highs.

                  [GBP, USD]
                  Cable topped at 1.2518 at the N.Y. open, later pulling back to 1.2421 after the London close. The dynamic largely mirrored a fall and then partial rebound in the dollar. With the global rate of coronavirus infection in decline, and major economies starting a phased reopening, 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]
                  EUR-CHF traded briefly through its 50-day moving average, on its way to April highs of 1.0611 on Tuesday, later pulling back into 1.0550 as risk taking levels faded. 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 1.3936 lows, levels last seen on April 15, coming from overnight highs of 1.4073. The sharp rise in oil prices were the major driver, seeing WTI crude rally to $13.68 from lows of $10.09. Since then, WTI has slipped back under the $12.00 mark, allowing USD-CAD to recover to 1.4000 highs. Troubling for the CAD going forward are Western Canadian Select oil prices, which reportedly remain on the $6/bbl handle, and will limit USD-CAD downside potential for the time being.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis April 28, 2020 7:46 am
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5061
                    XE Market Analysis: North America - Apr 28, 2020

                    The dollar has taken a rotation lower concomitantly with a pick up in risk appetite during the London AM session, which saw European stock markets and U.S. equity index futures rally following a low-volume sputtering price action in Asian markets. A paring in steep intraday oil price declines was in the mix. The narrow trade-weighted USD index ebbed by 0.5% in making a 13-day low at 99.50, while EUR-USD concurrently printed a high at 1.0886, a six-day peak, further extending the rebound from last Friday's one-month low at 1.0726, and USD-JPY fell below recent lows in posting a six-week low at 106.61. Most yen crosses haven been steady, though AUD-JPY floated to a seven-week high, with commodity currencies rebounding from weakness as European stock markets rose. The Canadian dollar, after weakening in the Asia-Pacific session amid a 15%-plus tumble in oil prices, rebounded. USD-CAD, after initially lifting out of a five-day low at 1.4017 to levels above 1.4070, about-turned and dropped to 13-day lows under 1.3950. This came as June WTI crude futures rebounded from a low at $10.09, lifting to levels around $12.50, more than halving the intraday decline to around 7% (prices as of the early London PM session). Weighing on oil prices had been news that United States Oil Fund LP, the largest U.S. oil ETF, said it would sell all its front-month crude contracts to avoid further losses. There are bullish arguments in crude market narratives, based on the view that rapidly diminishing storage space will force producers into large output cuts. AUD-USD more than reversed intraday losses and rallied to a seven-week high at 0.6507. The Kiwi dollar pared losses after dropping on a research note from Westpac forecasting the RBNZ to take the cash rate to -0.5% in November this year.

                    [EUR, USD]
                    EUR-USD has lifted about 0.5% on the back of a softer dollar, which has weakened concomitantly with a rise in European stock markets and U.S. index futures. The pair has printed a high at 1.0886, which is a six-day peak, further extending the rebound from last Friday's one-month low at 1.0726. This puts the EUR-USD a step 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. This week's policy meetings at the ECB (announcing Thursday) and Fed (announcing Wednesday) aren't expected to impart much directional impact EUR-USD, with both central banks already pursuing aggressive loose monetary policies and with neither expected to alter prevailing settings (other than perhaps an extension of the new emergency bond buying program in the case of the ECB) while repeating "do what it takes" guidance. The sharp narrowing in the dollar's yield advantage that was seen in March, when the Fed reversed all rate hikes it make from late 2015 through to last year, came to a pause in early April, with Treasury/Bund yield differentials having since holding steady. The pairing looks likely to lack a clear directional bias, though risks seem to be skewed to the downside given the political stresses within the EU.

                    [USD, JPY]
                    USD-JPY has fallen below recent lows in posting a six-week low at 106.61. The decline has reflected broad dollar softness, as most yen crosses haven been steady today, while AUD-JPY floated to a seven-week high. The BoJ boosted its JGB purchases at its scheduled operation, but to little impact on the yen. The BoJ yesterday delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies. Without a vaccine, much will depend on economies return to function without causing a second wave of inflections. The phased approach will also rule out the possibility for there being a V-shaped global economic rebound. With a vaccine not likely to be available until at least next year, one hope is that diagnostic testing becomes so widespread that it would turn the coronavirus from an invisible entity to a visible one, which would allow effective isolation of those infected. But, most countries remain a long way from that (at bet so far achieving a few dozen tests per 1000 people). For now, we expect USD-JPY to continue to trade without a clear directional bias.

                    [GBP, USD]
                    Sterling has been idling at near net unchanged levels so far today, after rising versus most of the other main currencies yesterday. Cable is settled the low 1.2400s, a little off the eight-day high seen yesterday at 1.2456. The pound was buoyed on Monday by Prime Minister Johnson's return to work after recovering from his brush with Covid-19, and, while Johnson said that it was still too early to ease the lockdown, the UK Treasury is reportedly drawing up measures to "get Britain back to work," including plans for "Covid-secure offices." Recent gains in global stock markets have also lifted the pound, which has been apt to perform similar to other "risk-off" currencies, such as commodity currencies, during the pandemic crisis. The pound is up by over 8% from the 35-year seen in March, but is down by 6% on the year-to-date. The combo of the UK's open economy, current account deficit and outsized financial sector, has meant that the pound has been vulnerable to risk aversion in global markets. With the global rate of coronavirus inflection in decline, and major economies starting a phased reopening, 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]
                    The Canadian dollar rebounded during the London morning session amid a rally in European stock markets and U.S. equity index futures. The Canadian currency had weakened in the Asia-Pacific session amid a 15%-plus tumble in oil prices. USD-CAD, after initially lifting out of a five-day low at 1.4017 to levels above 1.4070, about-turned and dropped to 13-day lows under 1.3950. The rebound in the Canadian dollar was concomitant with a rebound from lows in oil prices. June WTI crude futures hit a low at $10.09 before rebounding to levels around $12.50, more than halving the intraday decline to around 7% (prices as of the late London AM session). Weighing on oil prices had been news that United States Oil Fund LP, the largest U.S. oil ETF, said it would sell all its front-month crude contracts to avoid further losses amid collapsing prices. But, there is bullish arguments taking hold in market narratives, or at least a view for oil prices to stabilize. Goldman Sachs research, for instance, concluded last week that global oil storage capacity would be reached within three or four weeks, which, once realized, would force a 20% cut in production. Such a cut would be tantamount fo 18-20 mln barrels per day, which would be on top of the 9.7 mln barrels per day cut by OPEC++ nations, which takes effect on May 1st. GS estimated it would take between four and eight weeks for crude to base, noting that the production cuts won't be easy to reverse, which in turn would risk there being a supply deficit.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis April 28, 2020 3:45 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: Europe - Apr 28, 2020

                      Commodity currencies have seen moderate losses against the dollar and other main currencies against a backdrop of sputtering low-volume stock market trading and a turn lower in oil prices. The Kiwi dollar led the way lower for the commodity group after a research note from Westpac hit a bearish chord by forecasting the RBNZ to take the cash rate to -0.5% in November this year. RBNZ Governor Orr last week said he would not rule out negative rates, and that is was "open minded" on direct monetisation of government debt. NZD-USD dropped over 0.6% in printing a four-day low at 0.5992. With the RBA having recently been ruling out going negative with interest rates, AUD-NZD rallied to a fresh six-month high, at 1.0754. The antipodean cross has now risen by nearly 7% since mid March. Note that weekly consumer confidence out of Australia, not normally a market shaker, posted a fourth straight week of improvement from the record low that was seen in March, although the headline is still overall pessimistic at a sub-100 reading of 85.0. As for oil prices, June WTI futures were showing a drop of 16%, at $10.66, as of early London session. This follows news that United States Oil Fund LP, the largest U.S. oil ETF, said it would sell all its front-month crude contracts to avoid further losses amid collapsing prices. This weighed on oil-correlating currencies, including the Canadian dollar, which lifted USD-CAD out of a five-day low at 1.4017 to levels above 1.4070. Among the dollar majors there has been little movement. EUR-USD has seen little more than a 20 pip range in the lower 108.00s, holding above yesterday´s 108.08 low. USD-JPY has seen a sub-20 pip range in the lower 107.00s, holding above yesterday's 13-day low at 106.99. The BoJ boosted its JGB purchases at its scheduled operation, but to little impact on the yen. Cable settled in the low 1.2400s, down on the eight-day low seen yesterday at 1.2456.

                      [EUR, USD]
                      EUR-USD has seen little more than a 20 pip range in the lower 108.00s, holding above yesterday´s 108.08 low, and the one-month low that was seen last week at 1.0726. This week brings policy meeting at both the Fed and the ECB. The former is expected to be a non-event for markets, with no change widely anticipated (having already done so much to respond to the pandemic), while the ECB is likely to extend its debt purchases to include junk bonds. The outcome of the meetings aren't likely to impart much impact on EUR-USD. In the Eurozone, Italy managed to escape a ratings downgrade with S&P affirming the BBB rating after the close on Friday. Many countries in Europe are also starting a phased reopening of their economies, which is also being seen in some U.S. states. The euro saw some underperformance last week after EU leaders failed to come up with a deal on a trillion Eurozone recovery fund, although signing-off the finance minister's agreement on immediate crisis measures. The focus was on a temporary facility and loans, rather than perpetual Eurobonds and joint financing. Fault lines between southern and eastern European states also emerged. EUR-USD remains to the south of the halfway mark of the volatile range that was seen during the height of the market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. The pairing currently lacks a clear directional bias.

                      [USD, JPY]
                      USD-JPY has seen a sub-20 pip range in the lower 107.00s, holding above yesterday's 13-day low at 106.99. The BoJ boosted its JGB purchases at its scheduled operation, but to little impact on the yen. The BoJ yesterday delivered on expectations, 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 hasn't been impacted, with move largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. With the global rate of coronavirus infection in decline, global stock market sentiment has been buoyed by the commencement of a phased reopening in major economies. Without a vaccine, much will depend on economies return to function without causing a second wave of inflections. The phased approach will also rule out the possibility for there being a V-shaped global economic rebound. With a vaccine not likely to be available until at least next year, one hope is that diagnostic testing becomes so widespread that it would turn the coronavirus from an invisible entity to a visible one, which would allow effective isolation of those infected. But, most countries remain a long way from that (at bet so far achieving a few dozen tests per 1000 people). For now, we expect USD-JPY to continue to trade without a clear directional bias.

                      [GBP, USD]
                      Cable has settled in the low 1.2400s, down on the eight-day high seen yesterday at 1.2456. The pound was buoyed on Monday by Prime Minister Johnson's return to work after recovering from his brush with Covid-19, and, while Johnson said that it was still too early to ease the lockdown, the UK Treasury is reportedly drawing up measures to "get Britain back to work," including plans for "Covid-secure offices." Recent gains in global stock markets have also lifted the pound, which has been apt to perform similar to other "risk-off" currencies, such as commodity currencies, during the pandemic crisis. The pound is up by over 8% from the 35-year seen in March, but is down by 6% on the year-to-date. The combo of the UK's open economy, current account deficit and outsized financial sector, has meant that the pound has been vulnerable to risk aversion in global markets. With the global rate of coronavirus inflection in decline, and major economies starting a phased reopening, 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]
                      Hefty declines in oil prices have weighed on the Canadian dollar, along with other oil-correlating currencies, lifting USD-CAD out of a five-day low at 1.4017 to levels above 1.4070. June WTI futures were showing a drop of 16%, at $10.66, as of early London session. This follows news that United States Oil Fund LP, the largest U.S. oil ETF, said it would sell all its front-month crude contracts to avoid further losses amid collapsing prices. Goldman Sachs research concluded last week that global oil storage capacity would be reached within three or four weeks, which, once realized, would force a 20% cut in production. Such a cut would be tantamount fo 18-20 mln barrels per day, which would be on top of the 9.7 mln barrels per day cut by OPEC++ nations, which will takes effect on May 1st. GS estimated it would take between four and eight weeks for crude to base, noting that the production cuts won't be easy to reverse, which in turn would risk there being a supply deficit.

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