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By XE Market Analysis April 27, 2020 2:45 pm
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    XE Market Analysis Posts: 5061
    XE Market Analysis: Asia - Apr 27, 2020

    After falling to one-week lows of 99.83 overnight, the DXY headed modestly higher to 100.18 through the N.Y. morning session. As has been the case of late, trading ranges were narrow relative to the wild swings seen in March. There was no noteworthy data on tap Monday. Wall Street rallied, with gains coming on the back of partial economic re-openings in some states. The major indices were up better than 1%. Treasury yields rose as well. The FOMC meeting kicks off on Tuesday, with the policy announcement due Wednesday. Given all the heavy-lifting seen from the Fed with regards to the pandemic, the FOMC is expected on hold. EUR-USD dipped to 1.0817 from 2.0860 highs, as USD-JPY rallied out of 106.99 lows to 107.35. USD-CAD topped over 1.4080, later easing to 1.4031 lows. Cable opened at 1.2445, later falling to 1.2399.

    [EUR, USD]
    EUR-USD headed from four-session highs of 1.0860 seen ahead of the N.Y. open, to a 1.0817 low into the London close. Trade was relatively light, with the pairing overall remaining inside a well worn trading band for the past week or so. Wednesday's FOMC announcement and Thursday's ECB announcement are not expected to have much FX impact, with the former seen on hold following the huge policy moves already made, and the later widely expected to shift its debt purchases to include junk paper.

    [USD, JPY]
    USD-JPY was lifted to 107.35 highs, after falling to near two-week lows of 106.99 earlier in the session. The pairing slipped from 107.55 to 107.30 in the immediate aftermath of the expected BoJ decision to make JGB purchases unlimited, while increasing its buying of corporate bonds and commercial paper, though a generally perkier Dollar subsequently limited downside. The April 15 low of 106.93 is support now, with resistance at Friday's high of 107.76.

    [GBP, USD]
    Cable headed from opening highs of 1.2445 to late morning lows of 1.2399. The pair posted a one-week high at 1.2455, just ahead of the London inter bank open. The pound was supported in London morning trade 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 lock down, the UK Treasury is reportedly drawing up measures to "get Britain back to work," including plans for "Covid-secure offices." With the global rate of coronavirus infection growth declining, and major economies starting a phased reopening, the tide looks to be shifting, for now. This backdrop should help support the pound.

    [USD, CHF]
    EUR-CHF traded through its 20-day moving average, on its way to near three-week highs of 1.0570 on Monday, as risk-on conditions prevailed.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 eased from overnight highs of 1.4112, basing at 1.4040 in London morning trade, since bouncing over 1.4080 in early North America. Risk-on conditions kept USD gains hemmed in generally, though another 25-plus percent drop in WTI crude limited USD-CAD's downside potential. On a positive note, the Western Canadian Select grade of crude is reportedly trading over $6/bbl, a vast improvement from the negative numbers seen for a couple of days last week. The pairing later bottomed at 1.4031 as crude bounced. Big picture, oil prices will continue to drive USD-CAD direction.

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    By XE Market Analysis April 27, 2020 4:14 am
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      XE Market Analysis: Europe - Apr 27, 2020

      The Australian dollar has outperformed while the U.S. dollar has underperformed amid a backdrop of rising stock markets in Asia. The narrow trade-weighted USD index dropped 0.5% in making a one-week low at 99.86, while EUR-USD concomitantly posted a five-day high at 1.0860, putting in some more distance from the one-month low that was seen last week at 1.0726. Both AUD-USD and NZD-USD rallied as markets cheered moves in both Australia and New Zealand to reopen their economics from coronavirus lockdowns. Both countries stand out as being among the most successful in flattening their infection-rates curves. The Aussie dollar rallied by over 1.2% in making a seven-week high at 0.6470. USD-JPY, meanwhile, ebbed below last week's lows in posting a 12-day low at 107.14, largely reflecting the softer tone in the dollar today. The BoJ, as expected, announced that JGB purchases can now be unlimited (formerly capped at Y80 tln per year) while announcing an increase in corporate bond and commercial paper. The yen wasn't impacted. The move, aside from being anticipated, is largely symbolic, as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. Elsewhere, the pound was buoyed by news that Prime Minister Johnson will today be returning to work after recovering from his brush with Covid-19. Cable posted a one-week high at 1.2455, while EUR-GBP ebbed to within a couple of pips of last Thursday's low at 0.8708. Ahead this week, the Fed and ECB meet on policy. 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.

      [EUR, USD]
      EUR-USD posted a five-day high at 1.0860, putting in some more distance from the one-month low that was seen last week at 1.0726. A broader rotation in the dollar has once again been the dominant directional influencer. 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 ebbed below last week's lows in posting a 12-day low at 107.14. The move largely reflects a broadly softer tone in the dollar today, which been concomitant with rallying stock markets in Asia. The BoJ, as expected, announced that JGB purchases can now be unlimited (formerly capped at Y80 tln per year) while announcing an increase in corporate bond and commercial paper. The yen hasn't been impacted. The move is largely symbolic as the central bank's 0% target on the 10-year JGB was being met without the need for unlimited purchases. Global markets are likely to remain in a cautious state with regard to the global lockdowns caused by the coronavirus pandemic. Some economies are starting to reopen, but the phased approach will rule out the possibility for there being a v-shaped global economic rebound, while there remain concerns for a second wave of infections. With a vaccine not likely to be available until at last 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). The ongoing uncertainty is likely to continue to plague investors. Japanese investors will be apt to keep more capital than otherwise in domestic accounts and assets while this state of affairs persists, while forex market participants are likely to continue to view the yen as a safe haven currency. The reality is that the return to economic normalcy is likely to be a long road. A recent study from the Harvard School of Public Health highlighted that (of the U.S., but relevant to most countries) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

      [GBP, USD]
      The pound has been buoyed by news that Prime Minister Johnson will today be returning to work after recovering from his brush with Covid-19. Cable posted a one-week high at 1.2455, while EUR-GBP ebbed to within a couple of pips of last Thursday's low at 0.8708. One view in market narratives is that Johnson's return at the helm will increase the odds for the UK starting a phased reopening of the economy. The pound and UK markets were last week unperturbed by dismal UK PMI and retail sales data, having long since become well braced for the dismal run of data that's only now starting to show the full impact of the global lockdowns. The UK preliminary April composite PMI plummeted to a reading of just 12.9, down from 36.0 in March. One ray of light came from business optimism for the year ahead, which lifted off its record low that was seen in March, and which likely reflected expectations for a phased reopening of the economy. The data should help sharpen government attention about the trade-off between containing the coronavirus and economic prosperity. How to reopen economies before there is a cure or vaccine without risking a second wave of coronavirus infections is the major question, and current thinking is that it will take there being, other than social distancing, sufficient supplies of protective clothing along with availability of widespread diagnostic testing, which could take another month or two to realise. 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.

      [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 ebbed to a 1.4040 low, down on Friday's closing levels just above 1.4100 but so far remaining shy of Friday's low at 1.4021. Global stock markets have opened the week buoyantly as more economies head for a phased reopening from lockdowns, though oil prices have started on a back foot, with oversupply continuing to weigh. June WTI futures were down by over 13% on the day, at $14.68, as of the early London session. The dominant prognosis on oil, however, remains that that diminishing storage space for crude will force oil producers into bigger output cuts, while reopening economies from lockdown should start to see demand pick up. This in turn has weakened bearish arguments about the Canadian dollar. The currency correlates closely with oil prices, as oil exports account for nearly 25% of Canadian GDP (2018 data).

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      Topics7137 Posts7182
      By XE Market Analysis April 24, 2020 2:11 pm
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        XE Market Analysis: Asia - Apr 24, 2020

        The Dollar traded slightly lower in London morning dealings, before steadying inside of narrow ranges through the N.Y. session. The DXY ranged between 100.25 and 100.49 through the U.S. session. Markets continued to look through the data, as March durable orders slid much more than expected, but had little impact on the FX market. Wall Street struggled for direction through most of the session, while Treasury yields were mixed. EUR-USD ranged between 1.0785 and 1.0820, while USD-JPY eased from 107.67 to 107.40. USD-CAD rallied to 1.4120 from 1.4040, as Cable topped at 1.2363, and found a floor at 1.2320.

        [EUR, USD]
        EUR-USD recovered to 1.0820 highs in N.Y., after printing one-month lows of 1.0727 in London morning trade. The move lower came on follow through selling after EU leaders failed to agree on a EUR 1.0 tln pandemic recovery fund. After four consecutive sessions of lower daily lows, EUR-USD has perked up on the back of pre-weekend short covering.

        [USD, JPY]
        USD-JPY consolidation continues into the weekend, with the pairing posting a 108.04 to 107.28 range through the entire week. N.Y. trad on Friday has seen the pairing stuck between 107.67 and 107.40. Focus will shift next week to the BoJ meeting, where there have been reports the Bank may up its JGB and corporate bond purchases. The news saw USD-JPY spike briefly to highs of the week, though were not sustainable. Given the pandemic, reports of Yen repatriations have been noted, expected to limit USD-JPY upside potential.

        [GBP, USD]
        Cable slipped from opening highs over 1.2375, later bottoming at 1.2320. Weak U.K. data had little lasting impact on the Pound, as Thursday's ugly PMIs and Friday's soft retail sales were largely looked through. GBP-USD steadied through the second half of the week, after coming under some pressure earlier. As most Dollar pairings this week, Cable remained in consolidative mode.

        [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.

        [USD, CAD]
        USD-CAD rallied to 1.4108 highs, up from 1.4024 lows seen into the North American open. WTI crude has come off the boil, which has supported the pairing, as WTI crude eased under $16.50 from highs near $18.00. Canadian oil prices remain in positive territory after sliding under zero earlier in the week, but continue to trade a huge discounts to U.S. WTI crude. Rapidly filling storage capacity will likely result in further cuts to Canadian production, which should keep CAD upside limited for now.

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        Topics7137 Posts7182
        By XE Market Analysis April 24, 2020 7:41 am
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          XE Market Analysis: North America - Apr 24, 2020

          The dollar pared intraday gains and most currency pairings were showing a net movement of less than 0.2% on the day heading into the New York interbank market opening. European stock markets pared intraday losses of over 2%, with the pan-region Stoxx 600 showing a 0.5% loss as of the early PM session. S&P 500 futures were showing a near 1% gain. The narrow trade-weighted USD index rose over 0.4% in posting a 17-day high at 100.86 in pre-European trading, subsequently correcting to near net unchanged levels near 100.40. EUR-USD, amid its fourth consecutive day of lower daily lows, dropped nearly 0.5% in printing a fresh one-month low at 1.0728 before rebounding to around the 1.0780 mark. EUR-JPY printed a three-year low at 115.54 before recouping to around 116.00. Markets have been overall disappointed after EU leaders yesterday 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, while fault lines between southern and eastern European states emerged. Elsewhere, USD-JPY has for a fifth consecutive day held a narrow range in the mid 107.00s, lacking direction presently. Japan's finance minister Aso today said that the BoJ hasn't reached a decision on unlimited bond buying. The Nikkei newspaper yesterday reported that the central bank is discussing unlimited government bond purchases. The BoJ meets on Monday. USD-CAD settled around 1.4050 to 1.4100 after lifting out of yesterday's one-week low at 1.3998, which was the culmination of a correction from the 1.4266 high that was seen on Tuesday.

          [EUR, USD]
          The euro saw some underperformance after EU leaders yesterday 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. EUR-USD, now amid its fourth consecutive day of lower daily lows, dropped nearly 0.5% in printing a fresh one-month low at 1.0727, though has since recouped back above 1.0750. EUR-JPY to a three-year low at 115.54. Regarding the Eurozone recovery fund, while leaders made some progress in their meeting yesterday, it was not what markets liked as 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. While the euro has declined, peripheral Eurozone bond markets have underperformed. EUR-USD has been falling further 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. A re-test of the three-year low at 1.0637 is looking increasingly likely.

          [USD, JPY]
          USD-JPY has continued to hold a narrow range in the mid-to-upper 107.00s, lacking direction presently, while the yen has generally traded moderately softer versus most of the other main currencies amid a backdrop of advancing stock markets. Another massive U.S. coronavirus relief package and a rebound in oil prices have helped lift sentiment, reducing the yen's safe-haven premium. On Japan's domestic front, preliminary PMI survey data for April dropped sharply. The manufacturing PMI dove to a 37.8 reading in the April flash estimate, down from 44.2 in March, while the composite PMI plunged to 27.8 from 36.2. As with nearly all dismal data being released these days, the figures are hardly surprising given the global lockdowns. Regardless of Japanese fundamentals, we expect the yen will remain prone to outperformance during any further phases of acute risk-off positioning, which remains a risk as expectations that loosening lockdown restrictions may be exceeding the potential for a V-shaped recovery. The reality is that the return to economic normalcy is likely to be a long road. A study from the Harvard School of Public Health last week highlighted that (of the U.S., but relevant to most countries) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

          [GBP, USD]
          The pound and UK markets were unperturbed by the dismal UK PMI data, having long since become well braced for the dismal run of data that's only now starting to show the full impact of the global lockdowns. The UK preliminary April composite PMI plummeted to a reading of just 12.9, down from 36.0 in March, driven by an eye-watering drop in services, to 12.3 from 34.5. The scale of decline in the composite reading is, of course, the biggest since records began in 1998, reflecting widespread business mothballing. On ray of light came from business optimism for the year ahead, which lifted off its record low that was seen in March, and which likely reflected expectations for a phased reopening of the economy. The data should help sharpen government about the trade-off between containing the coronavirus and economic prosperity. How to reopen economies before there is a cure or vaccine without risking a second wave of coronavirus infections is the major question, and current thinking is that it will take there being, other than social distancing, sufficient supplies of protective clothing along with availability of widespread diagnostic testing, which could take another month or two to realise. Cable is presently trading at near net unchanged levels on the day, near the 1.2450 mark. The pair is up by over 8% from the 35-year seen in March, but is down by 7% 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.

          [USD, CHF]
          EUR-CHF has remained heavy after last week testing the five-year low that was first seen on March 9th at 1.0505 . Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich 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 argues that Switzerland needs a more expansive fiscal policy.

          [USD, CAD]
          USD-CAD has settled around 1.4050 to 1.4100 after lifting out of yesterday's one-week low at 1.3998, which was the culmination of a correction from the 1.4266 high that was seen on Tuesday (after May WTI oil contracts went negative). June WTI oil prices have lifted to around $16-$18 levels, with crude markets having found a toehold. The expectation is that diminishing storage space for crude will force oil producers into bigger output cuts, while reopening economies from lockdown should start to see demand pick up. This in turn has weakened bearish arguments about the Canadian dollar. The currency correlates closely with oil prices, as oil exports account for nearly 25% of Canadian GDP (2018 data).

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          Topics7137 Posts7182
          By XE Market Analysis April 24, 2020 4:10 am
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            XE Market Analysis Posts: 5061
            XE Market Analysis: Europe - Apr 24, 2020

            The dollar has traded firmer amid a backdrop of souring risk appetite after EU leaders yesterday signed-off the finance minister's agreement on immediate crisis measures but failed to come up with a deal on a trillion Eurozone recovery fund. This, along with news in the U.S. that Gilead Sciences Inc's antiviral drug Remdesivir had failed to help severely ill Covid-19 patients in its first clinical trial, have weighed on global stock markets, with Europe's Stoxx 50 futures underperforming with losses over over 2.2%. The narrow trade-weighted USD index rose 0.4% in posting a 17-day high at 100.79, while EUR-USD, now amid its fourth consecutive day of lower daily lows, dropped nearly 0.5% in printing a fresh one-month low at 1.0728. Euro underperformance aided EUR-JPY to a three-year low at 115.54. Regarding the Eurozone recovery fund, while leaders made some progress in their meeting yesterday, it was not what markets liked as 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. While the euro has declined, peripheral Eurozone bond markets have underperformed. Elsewhere, commodity currencies have ebbed after rising over the last couple of days. USD-JPY has for a fifth consecutive day held a narrow range in the mid 107.00s, lacking direction presently, while the yen has generally traded moderately firmer today versus most of the other main currencies amid the backdrop of sputtering stock markets. Japan's finance minister Aso today said that the BoJ hasn't reached a decision on unlimited bond buying. The Nikkei newspaper yesterday reported that the central bank is discussing unlimited government bond purchases. The BoJ meets on Monday.

            [EUR, USD]
            The euro has underperformed after EU leaders yesterday 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. EUR-USD, now amid its fourth consecutive day of lower daily lows, dropped nearly 0.5% in printing a fresh one-month low at 1.0728. Euro underperformance aided EUR-JPY to a three-year low at 115.54. Regarding the Eurozone recovery fund, while leaders made some progress in their meeting yesterday, it was not what markets liked as 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. While the euro has declined, peripheral Eurozone bond markets have underperformed. EUR-USD has been falling further 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. A re-test of the three-year low at 1.0637 now looks likely.

            [USD, JPY]
            USD-JPY has for a fifth consecutive day held a narrow range in the mid 107.00s, lacking direction presently, while the yen has generally traded moderately firmer today versus most of the other main currencies amid a backdrop of sputtering stock markets. Japan's finance minister Aso today said that the BoJ hasn't reached a decision on unlimited bond buying. The Nikkei newspaper yesterday reported that the BoJ is discussing unlimited government bond purchases (the current JGB limit for the central bank is 80 tln per year), while keeping the 10-year target at 0%. Further clarity is needed as the BoJ has been meeting the 0% target without the need for unlimited JGB purchases. The Nikkei story also reported that the central bank may also double purchase targets for commercial paper and corporate bonds. The BoJ meet on Monday for a shortened one-day gathering. It's unlikely that such a move would drive the yen lower, at least in a sustained way, while global markets remain in a cautious state with regard to the global lockdowns caused by the coronavirus pandemic. Japanese investors will be apt to keep more capital than otherwise in domestic accounts and assets while uncertainty about the global outlook persists, while forex market participants are likely to continue to view the yen as a safe haven currency. We have been arguing that expectations about the moves toward loosening lockdown restrictions may be exceeding the potential for a V-shaped recovery. The reality is that the return to economic normalcy is likely to be a long road. A recent study from the Harvard School of Public Health highlighted that (of the U.S., but relevant to most countries) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

            [GBP, USD]
            The pound and UK markets have been unperturbed by dismal UK PMI (yesterday) and retail sales (today) data, having long since become well braced for the dismal run of data that's only now starting to show the full impact of the global lockdowns. The UK preliminary April composite PMI plummeted to a reading of just 12.9, down from 36.0 in March. One ray of light came from business optimism for the year ahead, which lifted off its record low that was seen in March, and which likely reflected expectations for a phased reopening of the economy. The data should help sharpen government attention about the trade-off between containing the coronavirus and economic prosperity. How to reopen economies before there is a cure or vaccine without risking a second wave of coronavirus infections is the major question, and current thinking is that it will take there being, other than social distancing, sufficient supplies of protective clothing along with availability of widespread diagnostic testing, which could take another month or two to realise. The pound is up by over 8% from the 35-year seen in March, but is down by 7% 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.

            [USD, CHF]
            EUR-CHF has remained heavy after last week testing the five-year low that was first seen on March 9th at 1.0505 . Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich 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 argues that Switzerland needs a more expansive fiscal policy.

            [USD, CAD]
            USD-CAD has settled near 1.4100 after lifting out of yesterday's one-week low at 1.3998, which was the culmination of a correction from the 1.4266 high that was seen on Tuesday (after May WTI oil contracts went negative). June WTI oil prices have lifted to around $16-$18 levels, with crude markets having found a toehold. The expectation is that diminishing storage space for crude will force oil producers into bigger output cuts, while reopening economies from lockdown should start to see demand pick up. This in turn has weakened bearish arguments about the Canadian dollar. The currency correlates closely with oil prices, as oil exports account for nearly 25% of Canadian GDP (2018 data).

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis April 23, 2020 2:40 pm
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              XE Market Analysis Posts: 5061
              XE Market Analysis: Asia - Apr 23, 2020

              The Dollar index fell through the morning as risk-on conditions prevailed, later rallying as Wall Street gave back the bulk of early gains. The DXY bottomed at 100.06, from 100.63 before peaking at 100.57. Jobless claims rose another 4.2 mln, but had little market impact. New home sales fell in line with expectations has were largely looked through as well. Wall Street posted solid gains in morning trade,as optimism that the worst of the pandemic may be approaching, and hopes to re-open parts of the economy had driven early gains. These were largely given back following a report that a China trial of Gilead's anti-viral Remdesivir drug ended in failure. EUR-USD rallied to 1.0845 from under 1.0765 at the open, later falling back toward 1.0760. USD-JPY topped at 108.04 on reports the BoJ will discuss buying more bonds, later bottoming at 107.40. USD-CAD pulled back to near 1.4000 from over 1.4250, as oil prices rallied, while Cable pulled back from highs of 1.2415 to under 1.2335.

              [EUR, USD]
              EUR-USD took an overnight hit following horrible preliminary April PMIs. The manufacturing sector outperformed, but the reading dropped to 33.6 from 44.5 in March. The services sector collapsed to 11.7 from 26.4. The hospitality and tourism sectors in particular were hit and for tourism in particular there will be little chance of a quick recovery. EUR-USD fell from near 1.0835 to near one-month lows of 1.0756 into the N.Y. open. In N.Y. the pairing rallied back over 1.0845, later falling under 1.0775 as Wall Street gave back the bulk of early gains.

              [USD, JPY]
              USD-JPY spiked to highs of 108.04 from 107.40 on a report from Nikkei news saying the BoJ is to discuss unlimited bond buying at the next meeting, including doubling the purchases of corporate bonds. USD-JPY has been in consolidation mode for a week now, and will need to move above last Friday's 108.08 high to shift sentiment. USD-JPY later faded to 107.40 lows.

              [GBP, USD]
              Cable topped at 1.2415 in early N.Y. trade, with risk-on conditions supporting. The buyers stepped back into the London close, and as Wall Street pared heavy early gains, the Pound traded to 1.2335 lows. is moderately higher on the day, though has remained within its Wednesday range. The pound and UK markets showed little reaction to the dismal UK PMI data, which were widely expected. The UK preliminary April composite PMI plummeted to a reading of just 12.9, down from 36.0 in March.

              [USD, CHF]
              EUR-CHF was range bound in N.Y. trade again on Thursday, giving the cross a bit of breathing space from the March 9 five-year low. Hopes to end global lock down resulted in a risk-on session, allowing EUR-CHF to head to 1.0530 highs early, though the pair later eased back under 1.0515. Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside.

              [USD, CAD]
              USD-CAD closed near 1.4160 on Wednesday, opening the session near 1.4150. The recent surge in WTI crude has limited USD-CAD upside, though as the Western Canadian Select grade of domestic crude remained priced in negative territory, the CAD had trouble rallying, finding support above the 1.4100 mark for three-days running. Later, USD-CAD broke lower, with the Loonie aided by a 30% rally in WTI crude, and Western Canadian Select heavy crude prices said to be back in positive territory, at over $8/bbl after two sessions under zero. The pairing printed lows of 1.4001 into mid-session.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis April 23, 2020 7:39 am
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                XE Market Analysis Posts: 5061
                XE Market Analysis: North America - Apr 23, 2020

                The euro has weakened against the dollar and most other currencies as the markets digested the magnitude of decline in preliminary April PMI survey data out of the Eurozone. The manufacturing sector dropped to 33.6 from 44.5 in March, while services sector collapsed to just 11.7 from 26.4 in the moth prior. PMI data out of the UK, Japan and Australia, also painted a dismal picture, predictably with the reports now fully encompassing the coronavirus/lockdown period, although crushing drops in service-sector PMI readings nevertheless raised eyebrows. Stock markets in Asia rose, while markets in Europe largely gave back opening gains. S&P 500 futures were near net unchanged as of the early European afternoon. EUR-USD printed a one-month low at 1.0756. The EU heads of state will be holding teleconference today on the question of how to finance stimulus measures. The ECB announced a further temporary easing of collateral rules, that will allow the inclusion of bonds downgraded below investment standards during the crisis, and which helped foster a narrowing in Eurozone yield spreads today. The Australian dollar rebounded out of a post-PMI data dip, posting a 0.6283 low against the U.S. buck, though the antipodean currency subsequently climbed to a three-day high of 0.6365. A surprisingly robust 29% m/m rise in preliminary March export data out of Australia, which followed weakness in January and February, helped give the Australian currency a boost, as did the the generally bullish session across Asia-Pacific equity markets today. The Kiwi dollar also lifted out of a 17-day low versus the U.S. dollar, partly with the New Zealand government pledging more fiscal stimulus, while the oil-correlating Canadian dollar also firmed. USD-CAD tested yesterday's low at 1.4113, remaining heavy after correcting from the 1.4266 high that was seen on Tuesday. June WTI crude prices lifted by over 10%, to levels above $15.0.

                [EUR, USD]
                EUR-USD has printed an 17-day low at 1.0768. The euro has been trading generally softer over the last two days, losing ground to the likes of the pound, the yen and the commodity currencies, though the magnitude of decline in preliminary April PMI survey data out of the Eurozone today has added impetus to sell. The manufacturing sector dropped to 33.6 from 44.5 in March, while services sector collapsed to just 11.7 from 26.4 in the moth prior. The EU heads of state will be holding teleconference today on the question of how to finance stimulus measures, and it seems likely that the focus will be on the financing through the EU's budget, rather than the creation of a new debt vehicle. The ECB announced a further temporary easing of collateral rules, that will allow the inclusion of bonds downgraded below investment standards during the crisis, and has today helped Eurozone yield spreads narrow and European stock markets to rally. The U.S. releases weekly jobless claims today, which we expect to show another massive rise, of 4.0 mln. New home sales data are expected to show a sharp fall to a 0.640 mln pace from 0.765 mln. Flash April manufacturing and services PMIs are due, too, and will also contribute to the dismal data picture. EUR-USD has now drifted to the south of the halfway mark of the volatile range that was seen during the height of the market panic in March. We expect EUR-USD, after whipping between a 1.0637 low and a 1.1494 high in March, to remain in a choppy trading pattern.

                [USD, JPY]
                USD-JPY has continued to hold a narrow range in the mid-to-upper 107.00s, lacking direction presently, while the yen has generally traded moderately softer versus most of the other main currencies amid a backdrop of advancing stock markets. Another massive U.S. coronavirus relief package and a rebound in oil prices have helped lift sentiment, reducing the yen's safe-haven premium. On Japan's domestic front, preliminary PMI survey data for April dropped sharply. The manufacturing PMI dove to a 37.8 reading in the April flash estimate, down from 44.2 in March, while the composite PMI plunged to 27.8 from 36.2. As with nearly all dismal data being released these days, the figures are hardly surprising given the global lockdowns. Regardless of Japanese fundamentals, we expect the yen will remain prone to outperformance during any further phases of acute risk-off positioning, which remains a risk as expectations that loosening lockdown restrictions may be exceeding the potential for a V-shaped recovery. The reality is that the return to economic normalcy is likely to be a long road. A study from the Harvard School of Public Health last week highlighted that (of the U.S., but relevant to most countries) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

                [GBP, USD]
                The pound and UK markets were unperturbed by the dismal UK PMI data, having long since become well braced for the dismal run of data that's only now starting to show the full impact of the global lockdowns. The UK preliminary April composite PMI plummeted to a reading of just 12.9, down from 36.0 in March, driven by an eye-watering drop in services, to 12.3 from 34.5. The scale of decline in the composite reading is, of course, the biggest since records began in 1998, reflecting widespread business mothballing. On ray of light came from business optimism for the year ahead, which lifted off its record low that was seen in March, and which likely reflected expectations for a phased reopening of the economy. The data should help sharpen government about the trade-off between containing the coronavirus and economic prosperity. How to reopen economies before there is a cure or vaccine without risking a second wave of coronavirus infections is the major question, and current thinking is that it will take there being, other than social distancing, sufficient supplies of protective clothing along with availability of widespread diagnostic testing, which could take another month or two to realise. Cable is presently trading at near net unchanged levels on the day, near the 1.2450 mark. The pair is up by over 8% from the 35-year seen in March, but is down by 7% 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.

                [USD, CHF]
                EUR-CHF has remained heavy after last week testing the five-year low that was first seen on March 9th at 1.0505 . Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich 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 argues that Switzerland needs a more expansive fiscal policy.

                [USD, CAD]
                The oil-correlating Canadian dollar has traded firmer over the last day. USD-CAD tested yesterday's low at 1.4113, remaining heavy after correcting from the 1.4266 high that was seen on Tuesday (when May WTI oil contracts went negative). June WTI oil prices were up 10.3% at $15.20, as of the early London session today. The expectation is that diminishing storage space for crude will force oil producers into bigger output cuts, while reopening economies from lockdown should start to see demand pick up.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis April 23, 2020 3:39 am
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                  XE Market Analysis Posts: 5061
                  XE Market Analysis: Europe - Apr 23, 2020

                  The Australian dollar rebounded out of a post-PMI data dip, aided by a generally risk-on sentiment in Asia-Pacific markets today, which followed the bullish vibe on Wall Street, where another massive U.S. coronavirus relief package and a rebound in oil prices have helped buoy stock markets. Preliminary April PMI data out of Japan and Australian were predictably dismal, with the reports now fully encompassing the coronavirus/lockdown period, though crushing drops in service-sector PMI readings nevertheless raised eyebrows. In Japan, the flash April services PMI plummeted to a 22.8 reading from 33.8 in March, while Australia's services PMI dove to 19.6 from 38.5. Their respective composite PMI readings came in at just 27.8 and 22.4, indicating sharply contracting economic activity. The Aussie dollar dipped in the immediate wake of the data releases, posting a 0.6283 low against the U.S. buck, though the antipodean currency subsequently climbed to a three-day high of 0.6365. A surprisingly robust 29% m/m rise in preliminary March export data out of Australia, which followed weakness in January and February, helped give the Australian currency a boost, as did the the generally bullish session across regional equity markets. The Kiwi dollar also lifted out of a 17-day low versus the U.S. dollar, partly with the New Zealand government pledging more fiscal stimulus, while the oil-correlating Canadian dollar also firmed. USD-CAD tested yesterday's low at 1.4113, remaining heavy after correcting from the 1.4266 high that was seen on Tuesday (when May WTI oil contracts went negative). June WTI oil prices were up 10.3% at $15.20, as of the early London session. The expectation is that diminishing storage space for crude will force oil producers into bigger output cuts. Elsewhere, EUR-USD has remained heavy, edging out a low at 1.0805, nearing yesterday's 16-day low at 1.0802. USD-JPY continued to hold a narrow range in the mid-to-upper 107.00s.

                  [EUR, USD]
                  EUR-USD has remained heavy, edging out a low at 1.0805, nearing yesterday's 16-day low at 1.0802. The euro has been trading generally softer over the last two days, losing ground to the likes of the pound, the yen and the commodity currencies. Rising peripheral Eurozone government bond yields over Bund yields has reflected the pandemic-crisis era concerns. The EU heads of state will be holding teleconference today on the question of how to finance stimulus measures, and it seems likely that the focus will be on the financing through the EU's budget, rather than the creation of a new debt vehicle. The ECB announced a further temporary easing of collateral rules, that will allow the inclusion of bonds downgraded below investment standards during the crisis. EUR-USD has now drifted to the south of the halfway mark of the volatile range that was seen during the height of the market panic in March. Last month's rapid deployment of monetary stimulus measures by the Fed have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency. This has put a floor under EUR-USD, which has held up for a month now. We expect EUR-USD, after whipping between a 1.0637 low and a 1.1494 high in March, to remain in a choppy trading pattern, lacking clear directional bias for now.

                  [USD, JPY]
                  USD-JPY has continued to hold a narrow range in the mid-to-upper 107.00s, lacking direction presently, while the yen has generally traded moderately softer versus most of the other main currencies amid a backdrop of advancing stock markets. Another massive U.S. coronavirus relief package and a rebound in oil prices have helped lift sentiment, reducing the yen's safe-haven premium. On Japan's domestic front, preliminary PMI survey data for April dropped sharply. The manufacturing PMI dove to a 37.8 reading in the April flash estimate, down from 44.2 in March, while the composite PMI plunged to 27.8 from 36.2. As with nearly all dismal data being released these days, the figures are hardly surprising given the global lockdowns. Regardless of Japanese fundamentals, we expect the yen will remain prone to outperformance during any further phases of acute risk-off positioning, which remains a risk as expectations that loosening lockdown restrictions may be exceeding the potential for a V-shaped recovery. The reality is that the return to economic normalcy is likely to be a long road. A study from the Harvard School of Public Health last week highlighted that (of the U.S., but relevant to most countries) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

                  [GBP, USD]
                  The pound has continued to perform like a commodity currency, rising by a similar magnitude to commodity currencies over the last day, which have rebounded from losses seen during the spate of acute risk aversion earlier in the week, with oil and stock markets finding grounds for a rebound. While the UK currency is up by over 8% from the 35-year seen in March, it remains down by an averaged 1.2% against the dollar, euro and yen from week-ago levels, and continues to trade at a notable trade-weighted discount on the year-to-date and from year-ago prices. The combo of the UK's open economy, current account deficit and outsized financial sector, makes the pound vulnerable to risk aversion in global markets, such as the pandemic crisis has wrought. The continued risk of the UK leaving the post-Brexit transition period (which expires at year-end and which maintains access to the EU's customs union and tariff-free single market) without a trade deal is also in the mix, with the UK government having this week vehemently insisted that it will no extend the transition period. We expect, however, that the worse is over for the pound. The global economy should pick up recovery momentum in the months ahead as economies reopen, assuming there will be a sufficient supplies of protective clothing against the coronavirus along with availability of widespread diagnostic testing. Cheap oil prices and massive stimulus measures should help the process.

                  [USD, CHF]
                  EUR-CHF has remained heavy after last week testing the five-year low that was first seen on March 9th at 1.0505 . Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich 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 argues that Switzerland needs a more expansive fiscal policy.

                  [USD, CAD]
                  The oil-correlating Canadian dollar has traded firmer over the last day. USD-CAD tested yesterday's low at 1.4113, remaining heavy after correcting from the 1.4266 high that was seen on Tuesday (when May WTI oil contracts went negative). June WTI oil prices were up 10.3% at $15.20, as of the early London session today. The expectation is that diminishing storage space for crude will force oil producers into bigger output cuts, while reopening economies from lockdown should start to see demand pick up.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis April 22, 2020 2:08 pm
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                    XE Market Analysis Posts: 5061
                    XE Market Analysis: Asia - Apr 22, 2020

                    The Dollar was again range bound in N.Y. on Wednesday, though did manage small gains overall. Risk-on conditions returned, with Wall Street higher as oil prices rebounded, and as hopes for at least a partial unlocking of the country set in. There was little in the way of incoming data but for FHFA house prices, which had no market impact. Thursday's U.S. calendar will reveal weekly jobless claims, where we see another 4.0 mln claims. March new home sales should begin to show the pandemic impact, and are expected to fall to a 0.640 mln pace from 0.765 mln pace. EUR-USD today trade from 1.0877 highs to 1.0815 lows. USD-JPY made its way from 107.60 to 107.93, as USD-CAD was steady between 1.4115 and 1.4175. GBP-USD opened at highs over 1.2375, later easing to lows near 1.2300 after the London close.

                    [EUR, USD]
                    EUR-USD opened in N.Y. at 1.0877, before easing to 1.0815 lows after the London close. Consolidation trade has set in, with the pairing today remaining inside of Monday's high and Tuesday's low. The Dollar's yield advantage has narrowed since the start of the pandemic, leaving EUR-USD downside supported, while the Fed's massive stimulus package satisfied needed Dollar demand. Until new developments make themselves known, we look for a relatively steady EUR-USD. Support comes at 1.0812, which was Friday's low, with resistance at 1.0918, representing the 20-day moving average.

                    [USD, JPY]
                    USD-JPY has put in another narrow trading range on Wednesday, managing a 107.52 to 107.87 band on an intra day basis, and a 107.62 to 107.93 since the N.Y. open. Consolidation continues as the pairing remains inside recent trading ranges, despite the swings between risk-on and risk-off conditions. Friday's USD-JPY high of 108.08 marks resistance, with support at Tuesday's 107.28 low.

                    [GBP, USD]
                    Cable posted a high at 1.2386 into the U.S. open, before turning lower, leaving yesterday's high at 1.2451 unchallenged. The Pound later fell back toward 1.2300 after the London close. The combo of the UK's open economy, current account deficit and outsized financial sector, makes the pound vulnerable to risk aversion in global markets, such as the pandemic crisis has wrought. The continued risk of the UK leaving the post-Brexit transition period, which expires at year-end and which maintains access to the EU's customs union and tariff-free single market, without a trade deal is also in the mix. The global economy should pick up recovery momentum in the months ahead as economies reopen, and cheap oil prices and massive stimulus measures should help the process.

                    [USD, CHF]
                    EUR-CHF was range bound in N.Y. trade on Wednesday, giving the cross a bit of breathing space from the March 9 five-year low. Hopes to end global lock down resulted in a risk-on session, allowing EUR-CHF to head to 1.0530 highs early, though the pair later eased back under 1.0515. Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside.

                    [USD, CAD]
                    USD-CAD fell to 1.4115 lows after the North American open, down from overnight highs of 1.4238. The recent slide in oil prices took the pairing to near three-week highs of 1.4265 on Thursday, though some steadying in WTI crude near the $14.00 mark gave the CAD a modest lift. As for Canadian oil prices, Western Select crude settled in negative territory on Tuesday, resulting in growing production cuts, dictated by a lack of storage infrastructure. The energy sector accounts for roughly 10% of Canada's economy. The April 2 high of 1.4299 is the next USD-CAD resistance level, with support at Tuesday's 1.4113 low.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis April 22, 2020 7:38 am
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                      XE Market Analysis Posts: 5061
                      XE Market Analysis: North America - Apr 22, 2020

                      Most currencies have been holding relatively narrow ranges against a backdrop of steadying stock markets. The Australian dollar was an exception, and to a lesser extend the pound, with both managing to bounce, partially recouping losses seen during the first two days of the week. In stock markets, the MSCI Asia-Pacific equity index still edged out a two-month low, though the main indices in China and South Korea managed to recover into the black during their PM sessions. The pan-Europe STOXX 600 index rose by 1%, and S&P 500 futures by more than 1% after the cash version of the index closed on Wall Street yesterday with a 3.1% decline. As for oil prices, the June WTI contract settled in whippy price action around the $10-$12 mark, above yesterday's low at $6.55. The rout in crude prices this week has rattled investors, starkly portending where the global economy is headed in the lockdown era. In currency markets, AUD-USD rallied by about 1% in making a high at 0.6353. Australian March retail sales surged by a record 8.2% m/m, though this should be downplayed as an aberration, having been driven by panicky stockpiling due to the coronavirus outbreak. The pop in the Aussie came well ahead of the data release, with market narratives pointing to profit-taking and short-squeeze motives. Both AUD-USD and AUD-JPY have remained shy of their respective highs from yesterday. Elsewhere, EUR-USD has been plying a narrow range in the mid 1.0800s, and USD-JPY has held a narrow range in the mid-to-upper 107.00s. The Canadian dollar has managed to find a toehold after recent oil-driven declines, causing USD-CAD to dip to a 1.4125 low, though yesterday's low at 1.4111 has remained unchallenged.

                      [EUR, USD]
                      EUR-USD has been plying a narrow range in the mid 1.0800s so far today, holding above the five-day low that was seen yesterday at 1.0816. The pair continues to trade a little to the south of the halfway mark of the volatile range that was seen during the height of the market panic in March. Last month's rapid deployment of monetary stimulus measures by the Fed have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency. This has put a floor under EUR-USD, which has held up for a month now. In the Eurozone, meanwhile, the focus has once again turned on BTPs (Italian bonds) and the widening of Eurozone spreads (although narrower today amid abatement in risk aversion), which has prompted some to expect further action from the ECB. The central bank already has more flexibility in its bond buying schedule with the move away from monthly purchase volumes, and with a longer term horizon for its QE program, and we suspect that central bankers are to a certain extent letting spreads move out this week to increase the pressure on European governments to come up with an agreement on stimulus spending at tomorrow's teleconference of heads of states. We expect EUR-USD, after whipping between a 1.0637 low and a 1.1494 high in March, to remain in a choppy trading pattern, lacking clear directional bias for now.

                      [USD, JPY]
                      The yen has outperformed, only moderately against the dollar, but more so against the euro and even more versus the underperforming commodity currencies amid a backdrop of sinking global equity markets. Yesterday's oil rout spooked investors, symbolising the impact of global lockdowns. USD-JPY printed a five-day low at 107.29, while EUR-JPY forayed into 19-day low territory. AUD-JPY, a forex market barometer of risk appetite in global markets, and a currency proxy of China, declined by some 0.7% in making a two-week low at 67.40. Japanese data yesterday showed a below-forecast 11.7% y/y drop in March exports, which racked up the 16th consecutive y/y decline. Imports contracted by 5.0% y/y. The net impact was a massive shrinkage in Japan's trade surplus, which totalled just Y4.9 bln, down from 110.8 bln in February and well off the median forecast for 459.9 bln. Regardless of Japanese fundamentals, we expect the yen will remain prone to outperformance during any further phases of acute risk-off positioning, which remains a risk as expectations that loosening lockdown restrictions may be exceeding the potential for a V-shaped recovery. The reality is that the return to economic normalcy is likely to be a long road. A study from the Harvard School of Public Health last week highlighted that (of the U.S.) that "intermittent distancing may be required into 2020 unless critical care capacity is increased substantially or a treatment of vaccine becomes available." We continue to anticipate USD-JPY trading at sub-100.00 levels.

                      [GBP, USD]
                      Cable has fallen to an 13-day low at 1.2348 on the back of both sterling underperformance and a generally firmer dollar. At the same time, the UK currency lost over 0.5% against the euro and nearly 1% to the yen. Sterling is once again correlating with global stock market direction, at least outside the case against the commodity and other currencies with high beta characteristics, which have come back under pressure over the last day. Brexit, while overshadowed by the pandemic, remains a concern. Negotiations between the UK and EU are recommencing this week via video conferencing. The UK government has continued to repeat that there will not be any extension of the post-Brexit transition, which expires at the end of the year (and which maintains UK membership of the EU's customs union and single market, but without voting rights) -- even if requested by the EU. The EU has said that it is open to extending the transition to allow more time for trade negotiations. The UK has until July 1st to formerly decide on whether to extend the transition period or not (a delay of up to two years is provisioned for in existing arrangements). The pressure is on, with little more than two months left until the UK will have to commit and with the two sides having not so far managed to narrow any of their differences on key sticking points. From the markets perspective this is negative for the pound, as it maintains the risk of the UK leaving the EU without a trade deal, and adopting much less favourable WTO terms for the bulk of its trade. As for the coronavirus situation in the UK, the country is now amid its fourth week in lockdown, which was extended last week through to May 7th. As elsewhere, and already being seen in the likes of Scandinavia, Germany and Austria, a partial reopening is on the cards in May, or at least June, pending on their being clear curve flattening in confirmed cases, along with sufficient supplies of protective clothing and availability of widespread diagnostic testing.

                      [USD, CHF]
                      EUR-CHF has remained heavy after last week testing the five-year low that was first seen on March 9th at 1.0505 . Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which should keep EUR-CHF directionally biased to the downside. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich 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 argues that Switzerland needs a more expansive fiscal policy.

                      [USD, CAD]
                      The Canadian dollar has managed to find a toehold after recent oil-correlating declines. USD-CAD dipped to a 1.4130 low, though yesterday's low at 1.4111 has remained unchallenged so far. As for oil prices, the June WTI contract was showing a 7% decline as of the early London session, though, at $10.75, remained above yesterday's low at $6.55. The give-away pricing reflects the fact there is increasingly no where to store crude. In time this will force significant production cuts from oil producing nations, with at least some crude importing nations likely to assist in the process by halting imports. The rout in crude prices this week has rattled investors, starkly portending where the global economy is headed in the lockdown era. We expect the Canadian dollar to remain directionally biased to the downside, though at some point oil prices are sure to stabilize and rise, which in turn should give the Loonie a prop.

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