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By XE Market Analysis April 22, 2020 4:07 am
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    XE Market Analysis Posts: 5061
    XE Market Analysis: Europe - Apr 22, 2020

    Outside a jump in the Aussie most currencies have been stable so far today, holding relatively narrow ranges against a backdrop of steadying 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 S&P 500 index bounced by over 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 was showing a 7.0% 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. In currency markets, AUD-USD rallied nearly 1% in making a high at 0.6353. Australian March retail sales surged by a record 8.2% m/m, though is being 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 1.4163 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, 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. In the Eurozone, meanwhile, the focus is once again on BTPs (Italian bonds) and the widening of Eurozone spreads, 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 the 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]
    USD-JPY has held a narrow range in the mid-to-upper 107.00s so far today, against a backdrop of steadying stock markets, which has curtailed safe-haven demand for the yen. 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 S&P 500 index bounced by over 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 was showing a 7.0% 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. Japanese data this week 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., 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]
    Sterling has found its feet after tumbling over the last two days amid a phase of acute risk aversion in global markets. A combo of no-deal Brexit risk and the difficulties the UK has in financing its current account deficit during times of heightened risk aversion had been weighing on the pound, though the UK currency remains comfortably above the major-trend lows it saw in March. Brexit, while overshadowed by the pandemic, remains a concern, or rather the enduring risk that the UK leaves the EU's single market at year-end without a new trade deal with the EU. Negotiations between the UK and EU have recommenced 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, with the UK's chief negotiator David Frost stating that "we will not ask" to extend the transition, arguing that extending would "simply prolong negotiations, create even more uncertainty, leave liable to pay more to the EU, and keep us bound to evolving EU laws at a time when we need to control our own affairs." The UK has until July 1st to formerly decide on whether to extend the transition period or not.

    [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 1.4163 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.

    XE Currency Blog

    Topics7137 Posts7182
    By XE Market Analysis April 21, 2020 2:37 pm
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      XE Market Analysis Posts: 5061
      XE Market Analysis: Asia - Apr 21, 2020

      The Dollar dipped some in early N.Y. trade on Tuesday, later bouncing back modestly later in the session. Narrow ranges were in place through the session. Wall Street was hit hard again on uncertain earnings outlooks, and the deepening of the oil price rout. Today's data saw March exiting home sales fall an as-expected 8.5%, with sales likely pressured by virus lock downs. Bigger picture for the USD, the enormous liquidity injections and Dollar swap lines put in place by the Fed in March took care of the bulk of USD demand, and since then, we have seen major Dollar pairings trading ranges shrink markedly, and directional cues dry up some.

      [EUR, USD]
      EUR-USD has remained range bound, bottoming at 1.0817 before reported European buyers stepped in, taking the pairing to 1.0880 highs. As has been the case with other Dollar pairings, a period of consolidation appears to be under way. 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 rallied to 107.82 highs, after opening under 107.40. After a softer start, the Dollar has perked up in late morning trade, though overall, remains inside recent trading ranges. Risk-off conditions have supported the USD, though further gains are likely to be limited, with the Dollar generally in a wait and see mode ahead of further pandemic unknowns. Friday's USD-JPY high of 108.08 marks resistance.

      [GBP, USD]
      Cable fell to over two-week lows of 1.2248 after the London close, having been on the decline through the session. A combination of no-deal Brexit risk and the difficulties the UK has in financing its current account deficit during times of heightened risk aversion in global markets has weighed on the pound. Brexit, while overshadowed by the pandemic, remains a concern that the UK leaves the EU's single market at year-end without a new trade deal with the EU. 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.

      [USD, CHF]
      EUR-CHF was range bound in N.Y. trade on Tuesday, breaking a streak of four straight down days, giving the cross a bit of breathing space from the March 9 five-year low into. Hopes to end global lock down resulted in a risk-off session, allowing EUR-CHF to head to 1.0520 highs. 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 rallied to levels last seen on April 2, peaking at 1.4265, up from overnight lows of 1.4114. The move higher has come from the devastating selloff in crude oil, which has left the price of Western Canadian Select grade of heavy crude in negative territory. This has resulted 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..

      XE Currency Blog

      Topics7137 Posts7182
      By XE Market Analysis April 21, 2020 7:06 am
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        XE Market Analysis Posts: 5061
        XE Market Analysis: North America - Apr 21, 2020

        Currencies have once again adopted a risk-off positioning formation as global stock and commodity markets tumble. The yen, closely followed by the dollar, have taken the lead in the outperforming pack while the commodity currencies have taken a lead in the underperforming group. Asian stock markets saw their biggest single-day sell-off in a month while the pan-Europe STOXX 600 equity index fell by nearly 2.5% as S&P 500 futures declined by over 1.5% after the cash version of the index closed out yesterday 1.8% for the worse. Yesterday's oil rout spooked investors, and while some economies are starting to reopen from lockdowns, the road back to normalcy is clearly going to be a long one. Amid this backdrop, the narrow trade-weighted USD index printed a thirteen-day high at 100.37 while EUR-USD concurrently ebbed to a four-day low at 1.0819. The yen outperformed, moderately against the dollar, but more so against the euro and even more versus the underperforming commodity currencies. 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. AUD-USD printed a four-day low at 0.6270. USD-CAD rallied to a 15-day high at 1.4266. While yesterday's rout in the expiring May WTI contract, and the aberration of negative pricing, has come and gone, June futures today have been highly volatile, opening above $21.0, diving to a low at $11.79 before rebounding back above $15.00. One potential support for oil prices is the fast reducing space at crude storage facilities, which is likely to force oil producers into big output cuts. President Trump, also, said that the U.S. is considering halting Saudi oil imports.

        [EUR, USD]
        EUR-USD ebbed to a four-day low at 1.0819, driven once again by a broader move in the dollar. 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency. 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]
        USD-CAD rallied to a 15-day high at 1.4251, partly driven by broad U.S. dollar strength and partly on Canadian dollar underperformance, which, like other commodity currencies, has come under pressure amid a prevailing bout of risk-off positioning in global markets. Yesterday's rout in the expiring May WTI contract, and the aberration of negative pricing, has come and gone, while June futures today have tumbled from levels above $20 to levels under $15.0. One potential support for oil prices is the fast reducing space at crude storage facilities, which could force oil producers to cut supply. U.S. President Trump is also reportedly considering halting Saudi oil imports.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis April 21, 2020 3:36 am
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          XE Market Analysis Posts: 5061
          XE Market Analysis: Europe - Apr 21, 2020

          The dollar and yen have traded firmer against most other currencies amid a risk-off environment. Asia stock markets have seen their biggest single-day sell-off in a month, with the MSCI Asia-Pacific index losing over 2%. S&P 500 futures were showing a loss of 0.7% after the cash version of the index closed out yesterday 1.8% for the worse, though price action has been whippy in the overnight session. Yesterday's oil rout spooked investors, symbolizing the impact of global lockdowns, and while some economies are starting to reopen from lockdowns (including hard-hit Italy, which will start a gradual reopening from May 4th), the road back to normalcy is going to be a long one. The World Health Organisation warned of there being a second wave of infections as economies reopen. Amid this backdrop, the narrow trade-weighted USD index printed a four-day high at 100.23. EUR-USD concurrently ebbed to a four-day low at 1.0826. The yen has outperformed, only moderately against the dollar, but more so against the euro and even more versus the underperforming commodity currencies. USD-JPY posted a four-day low at 107.40, while EUR-JPY forayed into 19-day low territory, and AUD-JPY, a forex market barometer of risk appetite in global markets, along with being a currency proxy of China, declined by some 0.7% in making a five-day low at 67.58. AUD-USD printed a four-day low at 0.6284. Oil prices have found a footing after the rout in the May WTI contract yesterday. June WTI crude was showing a 3% intraday gain as of the early London session, at $21.02. The near lack of storage appears to be putting a physical break on oversupply, with U.S. President Trump, for instance, is reportedly considering halting Saudi oil imports. This has helped USD-CAD steady after rallying yesterday, though the pair has still managed to edge out a five-day high at 1.4178.

          [EUR, USD]
          EUR-USD ebbed to a four-day low at 1.0826, with the pair driven once again by a broader move in the dollar. EUR-USD 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency. 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 four-day low at 107.40, 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 five-day low at 67.58. 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 edged out an 11-day low at 1.2390 on the back of a generally firmer dollar, though the pair looks to be amid a third consecutive week of trading without an overall clear directional bias. Post-Brexit negotiations are recommencing this week via video conferencing, though market participants remain too preoccupied with the pandemic and dealing with the economic devastation caused by global lockdowns than they are about Brexit matters. The UK government last week signalled its commitment to avoid 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 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), and the two sides have not so far managed to narrow any of their differences on key sticking points. As for the coronavirus situation in the UK, the country has emerged as being relatively hard hit, as have the other big European countries. 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]
          USD-CAD edged out a five-day high at 1.4178, despite oil prices managing to scrambled out a toehold after yesterday's rout in the expiring May WTI contract yesterday. June WTI crude was showing a 3% intraday gain as of the early London session today, at $21.02. The near lack of storage appears to be putting a physical break on oversupply, with U.S. President Trump, for instance, is reportedly considering halting Saudi oil imports.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis April 20, 2020 3:05 pm
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: Asia - Apr 20, 2020

            The Dollar was range bound in N.Y. on Monday, losing modest ground through the morning before perking up some after the London close. There was no data of significance. Wall Street fell, driven by the historic route in oil prices, which saw the May WTI contract print a negative $40/bbl. EUR-USD opened at 1.0850 lows, later printing 1.0887 high, before easing under 1.0860. USD-JPY eased from 107.86 to 107.61, while USD-CAD dropped from 1.4132 highs to 1.4032, then bouncing over 1.4120 as oil prices turned negative. GBP-USD headed to 1.2487 highs from early lows of 1.2415.

            [EUR, USD]
            EUR-USD printed U.S. highs of 1.0887, up from opening lows of 1.0850, in relatively light trade. Softer Treasury yields have weighed on the Dollar slightly this morning, though the pairing remains well inside of recent trading ranges. EUR-USD support comes sat 1.0812, which was Friday's low, with resistance at 1.0918, representing the 20-day moving average.

            [USD, JPY]
            USD-JPY posted an inside day on Monday, opening the N.Y. session at 107.86, later easing to 107.61 after the London close. Risk-off conditions weighed slightly, though overall, the FX market was largely in consolidation mode. The Yen is likely to continue to move in step with risk taking levels, and with the course of the pandemic still very uncertain, we suspect further JPY gains could be in the cards as the global economic recovery will not likely be in a straight line.

            [GBP, USD]
            Cable headed higher after opening the N.Y. session near 1.2415, later peaking at 1.2487. The pair remained within Friday's range, and is entering a third consecutive week of trading without a clear directional bias. Post-Brexit negotiations are recommencing this week via video conferencing, though market participants remain too preoccupied with the pandemic and dealing with the economic devastation caused by global lockdowns than they are about Brexit matters.

            [USD, CHF]
            EUR-CHF was range bound in N.Y. trade on Monday, breaking a streak of four straight down days, giving the cross a bit of breathing space from the March 9 five-year low into. Hopes to end global lock down resulted in a risk-off session, allowing EUR-CHF to head to 1.0520 highs. 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 rallied to 1.4132 into the North American open, after starting the Asian session at 1.4003.The plunge in May WTI crude prices, along with general risk-off conditions supported the pairing overnight. USD-CAD since eased back to 1.4032 lows, as June WTI crude steadied above lows, and as stocks open lower, but at better levels than futures indicated earlier. Support comes in at the 1.4000 level, with resistance at Thursday's high of 1.4182. May WTI crude, which expires on Tuesday, printed historic lows at -$40.00/bbl into the close, allowing USD-CAD to climb back over 1.4100.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis April 20, 2020 7:35 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: North America - Apr 20, 2020

              Oil currencies have come under pressure concomitantly with crude prices hitting 21-year lows, while most dollar pairings and associated crosses have been trading in comparatively narrow ranges amid a backdrop of sputtering stock markets. Most of the main Asian equity indices are showing losses of varying degrees, though Chinese markets bucked the trend with moderate gains, while European equities fell and S&P 500 futures posted losses of over 1.5%. May contract WTI crude oil futures traded to a $13.99 low, the lowest WTI benchmark prices have been since March 1999, in a move exacerbated by today being the last day of trading of the contract. The Oxford Institute for Energy forecast China's annual demand for oil will fall by between 100k and 250k barrels per day in what would be the first contraction since records began in 1990, which chimes with OPEC saying last week that global oil demand is set to fall to just 20 mln barrels per day, the lowest since 1989. In forex markets, the oil-correlating Canadian dollar is the weakest of the main currencies we track, off lows at the time of writing but still showing a loss of 0.7% to the U.S. dollar, which marginally registers as the firmest currency on the day. USD-CAD printed a high at 1.4103, up on Friday's low at 1.3998 but so far remaining shy of its Friday high, at 1.4119. EUR-USD, meanwhile, has been plying a narrow range in the mid-to-upper 1.0800s, managing to edge slightly above Friday's peak in posting a high at 1.0897. USD-JPY traded moderately firmer, to an intraday peak of 107.94, but remained shy of the Friday high at 108.08. Cable remained within its Friday range, while AUD-USD nudged above its Friday high in posting peak at 0.6393. On the coronavirus front, New Zealand said that it will be loosening lockdown restrictions from next week, while President Trump said that a Congressional deal to provide relief money for small businesses may come later today. Singapore, however, raised eyebrows in reporting a record high in new cases.

              [EUR, USD]
              EUR-USD has been plying a narrow range in the mid-to-upper 1.0800s, managing to edge slightly above Friday's peak in posting a high at 1.0897. The pair is trading 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency . 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 traded moderately firmer, to an intraday peak of 107.94, but has remained shy of the Friday high at 108.08. Japanese data 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, the yen will remain prone to outperformance during any further phases of acute risk-off positioning, which we think 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 settled above yesterday's eight-day low at 1.2408. A rebound capped out a 1.2522, with the pair having subsequently drifted back to the lower 1.2400s. Sterling is concurrently showing modest losses against the euro and yen, despite gains in global stock markets, to which the UK currency has for the most part been correlating positively during the prevailing pandemic era. The risk of a hard no-deal Brexit has re-emerged as a concern for the pound after a spokesman for the UK prime minister said yesterday that, 1, the pandemic has strengthened the need or the UK to be free of EU regulation after 2020, and 2, that there will not be any extension to 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. This comes with negotiations, which have been hobbled by the coronavirus crisis, set to resume next week. The UK has only until July 1st to decide on whether to extend the transition period or not, and the two sides have not so far managed to narrow any of their differences on key sticking points. The UK government is continuing to play hardball despite the disrupting impact of the pandemic. The risk is that the EU will call its bluff, as the economic consequences would be harder felt in the UK than in the EU. Tipping out of the transition period without a deal would result in the UK economy trading on less favourable WTO terms. The Centre for Economic Performance estimates that such a shift would reduce UK trade with the EU by 40% over 10 years, while also causing slowing in investment and productivity growth.

              [USD, CHF]
              EUR-CHF last week tested 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 printed a high at 1.4103, up on Friday's low at 1.3998 but so far remaining shy of its Friday high, at 1.4119. Oil prices, to which the Canadian dollar correlatives with, remain under pressure. May contract WTI crude oil futures were showing an intraday loss of 18% in hitting a low at $14.47, which is the lowest WTI benchmark prices have traded since March 1999. May futures expire tomorrow, while the June contract posted a low at $23.75. The Oxford Institute for Energy forecast China's annual demand for oil will fall by between 100k and 250k barrels per day in what would be the first contraction since records began in 1990, which chimes with OPEC saying last week that global oil demand is set to fall to just 20 mln barrels per day, the lowest since 1989. Given the massive demand/supply imbalance in oil markets, and after the IEA said last week in its monthly report, that there is "no feasible agreement that could cut supply by enough to offset such near-term demand losses." We retain a bullish view of USD-CAD.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis April 20, 2020 4:04 am
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: Europe - Apr 20, 2020

                Oil currencies have come under pressure concomitantly with crude prices hitting 21-year lows, while most dollar pairings and associated crosses have been trading in comparatively narrow ranges amid a backdrop of sputtering stock markets. Most of the main Asian equity indices are showing losses of varying degrees, though Chines markets bucked the trend with moderate gains, while S&P 500 futures are down 0.4%. May contract WTI crude oil futures were showing an intraday loss of 18% in hitting a low at $14.47, which is the lowest WTI benchmark prices have traded since March 1999. May futures expire tomorrow, while the June contract posted a low at $23.75. The Oxford Institute for Energy forecast China's annual demand for oil will fall by between 100k and 250k barrels per day in what would be the first contraction since records began in 1990, which chimes with OPEC saying last week that global oil demand is set to fall to just 20 mln barrels per day, the lowest since 1989. In forex markets, the oil-correlating Canadian dollar is the weakest of the main currencies we track, off lows at the time of writing but still showing a loss of 0.6% to the U.S. dollar, which marginally registers as the firmest currency on the day. USD-CAD printed a high at 1.4103, up on Friday's low at 1.3998 but so far remaining shy of its Friday high, at 1.4119. EUR-USD, meanwhile, plied a narrow range in the mid 1.0800s, holding well within Friday's range. USD-JPY traded moderately firmer, to an intraday peak of 107.94, but remained shy of the Friday high at 108.08. The likes of Cable and AUD-USD, and other pairings, also remained within their respective Friday ranges. On the coronavirus front, New Zealand said that it will be loosening lockdown restrictions from next week, while President Trump said that a Congressional deal to provide relief money for small businesses may come later today.

                [EUR, USD]
                EUR-USD has been plying a narrow range in the mid 1.0800s, holding well within Friday's range. The pair is trading 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency . 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 traded moderately firmer, to an intraday peak of 107.94, but has so far remained shy of the Friday high at 108.08. Japanese data 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. The yen will remain prone to outperformance during any further phases of acute risk-off positioning, which we think 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 settled in the mid 1.2400s, above last Thursday's elven-day low at 1.2408. The UK currency has for the most part been correlating positively during the prevailing pandemic era, while the risk of a hard no-deal Brexit has re-emerged as a concern for the pound after a spokesman for the UK prime minister said last week that, 1, the pandemic has strengthened the need or the UK to be free of EU regulation after 2020, and 2, that there will not be any extension to 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. This comes with negotiations, which have been hobbled by the coronavirus crisis, due to resume this week. The UK has only until July 1st to decide on whether to extend the transition period or not, and the two sides have not so far managed to narrow any of their differences on key sticking points. The UK government is continuing to play hardball despite the disrupting impact of the pandemic. The risk is that the EU will call its bluff, as the economic consequences would be harder felt in the UK than in the EU. Tipping out of the transition period without a deal would result in the UK economy trading on less favourable WTO terms. The Centre for Economic Performance estimates that such a shift would reduce UK trade with the EU by 40% over 10 years, while also causing slowing in investment and productivity growth.

                [USD, CHF]
                EUR-CHF last week tested 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 printed a high at 1.4103, up on Friday's low at 1.3998 but so far remaining shy of its Friday high, at 1.4119. Oil prices, to which the Canadian dollar correlatives with, remain under pressure. May contract WTI crude oil futures were showing an intraday loss of 18% in hitting a low at $14.47, which is the lowest WTI benchmark prices have traded since March 1999. May futures expire tomorrow, while the June contract posted a low at $23.75. The Oxford Institute for Energy forecast China's annual demand for oil will fall by between 100k and 250k barrels per day in what would be the first contraction since records began in 1990, which chimes with OPEC saying last week that global oil demand is set to fall to just 20 mln barrels per day, the lowest since 1989. Given the massive demand/supply imbalance in oil markets, and after the IEA said last week in its monthly report, that there is "no feasible agreement that could cut supply by enough to offset such near-term demand losses," we retain a bullish view of USD-CAD.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis April 17, 2020 2:32 pm
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: Asia - Apr 17, 2020

                  The Dollar eased on Friday, as some of the gains seen earlier in the week came undone due to pre-weekend position squaring. Hopes for virus treatments, and the beginnings of plans to unlock economies resulted in risk-on conditions, lifting Wall Street, which also weighed on USD safe-haven demand. On the data front, leading indicators were slightly better than expected, but still extremely weak, though ultimately had little market impact. EUR-USD rallied from opening lows of 1.0835, later peaking at 1.0892. USD-JPY fell from early highs near 107.80, basing at 107.30 at mid-morning. USD-CAD opened over 1.4080, later falling under 1.4025, while GBP-USD moved from 1.2460 ahead of the open, later topping over 1.2515 after the London close.

                  [EUR, USD]
                  EUR-USD bounced from 1.0835 lows seen at the open, coming from a nine-session base of 1.0812 into the open, later peaking at 1.0892 ahead of the London close. Pre-weekend short covering was a driver, as risk-on conditions prevailed, following upbeat signs on the pandemic front, including plans to reopen economies, and, hopeful signs for virus treatments. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, and will likely limit EUR-USD losses going forward.

                  [USD, JPY]
                  USD-JPY slipped from early highs of 107.93, bottoming at 107.30 by mid-morning. The move lower came on general Dollar selling into the weekend, with losses coming despite the risk-on conditions that usually weigh on the Yen. Safe-haven flows into the USD seen since mid-week have partly come undone, as recent talk of preparations to end lock downs, and encouraging news on the virus treatment front (Gilead), have impacted demand for Dollars. It will be a long road ahead until global economies get back on their feet, and there will likely be setbacks along the way. As a result, further Yen strength can be expected going forward.

                  [GBP, USD]
                  Cable topped at 1.2522 in London morning trade, subsequently drifted back to 1.24008 ahead of the N.Y. open. From there, taking its cue from broad USD selling seen through the morning, GBP-USD bounced back over 1.2515.The risk of a hard no-deal Brexit has re-emerged as a concern for the pound after a spokesman for the UK prime minister said yesterday that the pandemic has strengthened the need or the UK to be free of EU regulation after 2020 and that there will not be any extension to the post-Brexit transition, which expires at the end of the year.

                  [USD, CHF]
                  EUR-CHF bounced slightly in N.Y. trade on Friday, breaking a streak of four straight down days, giving the cross a bit of breathing space from the March 9 five-year low into. Hopes to end global lock down resulted in a risk-off session, allowing EUR-CHF to head to 1.0520 highs. 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 rallied from 1.4005 in Asia to 1.4118 into the North American open, as oil prices fell to fresh 18 years lows. Since then, the pairing pulled back to 1.4012 on the back of a partial oil price recovery, and risk on conditions. In addition, the USD overall has come under some broad pressure today, as position squaring into the weekend steps in. Note the DXY touched better than one-week highs on Thursday.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis April 17, 2020 7:31 am
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                    XE Market Analysis Posts: 5061
                    XE Market Analysis: North America - Apr 17, 2020

                    The dollar more than reversed out of intraday declines during the London AM session. The narrow trade-weighted USD index lifted out of a 99.85 and tested yesterday's eight-day high at 100.29, while EUR-USD dropped back to a 10-day low at 1.0813. The dollar also advanced against the pound, and the commodity currencies, breaking its inverse correlation with global stock market direction, which have rallied after U.S. President Trump said that U.S. states can reopen in a three-staged process. S&P 500 futures were showing a 3% gain heading into the New York open. The risk-on sentiment hasn't been covering the full spectrum of asset classes and currencies. Oil prices have plunged to fresh decade lows (WTI futures hitting an 18-year low at $18.03), and the likes of the Australian and Canadian dollars have more than reversed intraday gains that were being seen in the Asian session. U.S. Treasury yields have also come down, with the 10-year T-note yield dipping below 0.640%, down from the 0.691% high that was seen earlier in the day. USD-CAD hsa rebounded out of a two-day low at 1.4003, with the pair reaching levels around 1.4100 before capping out. USD-JPY ebbed modestly lower, down from Thursday's four-day high at 108.08, while the yen outperformed other currencies, albeit moderately so. In the news mix today, was China's Q1 GDP data plunging 6.8% y/y, the first contraction on record although hardly surprising given the draconian virus-containing measures taken in the country for much of the first quarter.

                    [EUR, USD]
                    EUR-USD has dropped back amid a general bout of dollar gains, which has pushed the pair to a 10-day low at 1.0813. The dollar looks to have broken its inverse correlation with global stock market direction, which have rallied after U.S. President Trump said that U.S. states can reopen in a three-staged process. S&P 500 futures are showing a near 3% gain presently. The risk-on sentiment isn't covering the full spectrum of asset classes and currencies. Oil prices have plunged to fresh decade lows, and the likes of the Australian and Canadian dollars have more than reversed intraday gains that were being seen in the Asian session. U.S. Treasury yields have also come down, with the 10-year T-note yield presently at 0.637%, down from the 0.691% high that was seen earlier in the day. EUR-USD at prevailing levels is 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, having satiated what had been a surge in demand for the world's reserve currency . 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 ebbed modestly lower, to levels below 107.70, down from Thursday's four-day high at 108.08. The yen has traded mixed in narrow ranges against other currencies, ebbing versus the commodity currencies while gaining modest ground versus the euro and some other currencies. The Japanese currency has been little impacted by a rotation high in global stock markets, sparked by U.S. President Trump saying that U.S. states can reopen in a three-staged process, joining a number of other countries that are already amid the first, cautious phase of unlocking their economies. This helped markets overlook China's GDP plunge of 6.8% y/y, the first contraction on record but hardly surprising given the draconian virus-containing measures taken in the country for much of the first quarter. There has been lots of talk about a V-shaped recovery, though 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 this week highlighted that the return to normal may be a long road, saying (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." Such a backdrop would keep the yen broadly underpinned. We continue to anticipate USD-JPY trading at sub-100.00 levels.

                    [GBP, USD]
                    Cable has settled above yesterday's eight-day low at 1.2408. A rebound capped out a 1.2522, with the pair having subsequently drifted back to the lower 1.2400s. Sterling is concurrently showing modest losses against the euro and yen, despite gains in global stock markets, to which the UK currency has for the most part been correlating positively during the prevailing pandemic era. The risk of a hard no-deal Brexit has re-emerged as a concern for the pound after a spokesman for the UK prime minister said yesterday that, 1, the pandemic has strengthened the need or the UK to be free of EU regulation after 2020, and 2, that there will not be any extension to 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. This comes with negotiations, which have been hobbled by the coronavirus crisis, set to resume next week. The UK has only until July 1st to decide on whether to extend the transition period or not, and the two sides have not so far managed to narrow any of their differences on key sticking points. The UK government is continuing to play hardball despite the disrupting impact of the pandemic. The risk is that the EU will call its bluff, as the economic consequences would be harder felt in the UK than in the EU. Tipping out of the transition period without a deal would result in the UK economy trading on less favourable WTO terms. The Centre for Economic Performance estimates that such a shift would reduce UK trade with the EU by 40% over 10 years, while also causing slowing in investment and productivity growth.

                    [USD, CHF]
                    EUR-CHF yesterday tested 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 hsa rebounded out of a two-day low at 1.4003, with the pair reaching levels around 1.4100. The Canadian dollar had seen modest outperformance after U.S. President Trump said that U.S. states can reopen in a phased process. This sparked a rally on global stock markets. But, oil markets haven't felt the good vibes, with sentiment remaining preoccupied by the massive demand/supply imbalance. Front-month WTI futures have racked up losses of over 8% in posting a new 18-year low at $18.03. This is telling of the fact that the return to economic normalcy is likely to be a long road. We retain a bullish view of USD-CAD.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis April 17, 2020 4:01 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: Europe - Apr 17, 2020

                      The dollar has traded mostly softer amid a backdrop of risk-back-on sentiment, sparked by U.S. President Trump saying that U.S. states can reopen in a three-staged process, joining a number of other countries that are already amid the first, cautious phase of unlocking their economies. S&P 500 futures rose nearly 4% in printing a three-week high, extending the 0.6% gain the cash version of the index saw yesterday. Asian stocks rallied, too, as have European index futures. Markets overlooked China's GDP plunge of 6.8% y/y, the first contraction on record but hardly surprising given the draconian virus-containing measures taken in the country for much of the first quarter. The narrow trade-weighted USD index ebbed back to 99.90, correcting from yesterday's eight-day high 110.29. EUR-USD concurrently rose to a 1.0881 high, up from yesterday's 10-day low at 1.0817. The dollar also lost some ground to the pound and Swiss franc, while USD-JPY ebbed modestly lower, to levels below 107.70, down from Thursday's four-day high at 108.08. The commodity currencies outperformed, albeit moderately so. AUD-USD printed a two-day high at 0.6383, while USD-CAD edged out a two-day low, at 1.4003. Oil markets haven't felt the prevailing risk-on winds, with sentiment remaining preoccupied by the massive demand/supply imbalance. Front-month WTI futures declined by over 4% in posting a new 21-year low at $18.96. This is telling of the fact that the return to economic normalcy is likely to be a long road.

                      [EUR, USD]
                      EUR-USD rose to a 1.0881 high, up from yesterday's 10-day low at 1.0817. The rise reflected a bout of broad dollar softness as the U.S. currency declined concomitantly with a rise in global stock markets after U.S. President Trump said that U.S. states can reopen in a three-staged process. The dollar has mostly been trading with an inverse correlation to global stock market direction over the coronavirus crisis period. EUR-USD is at prevailing levels 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. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the dollar in recent weeks, satiating what had been a surge in demand for the world's reserve currency while causing U.S. Treasury yield spreads versus the Bund benchmark to drop and stay down (the 10-year T-note versus Bund yield differential is down by about 115 bp from levels seen in just a month ago). Economic data on both sides of the Atlantic has been a secondary consideration even as the reports begin to show the depth of the devastation wrought by the shuttering of the economy last month -- the huge declines expected in activity have been realized, and then some. A study from the Harvard School of Public Health highlighted that the return to normal may be a long road, saying (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 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 ebbed modestly lower, to levels below 107.70, down from Thursday's four-day high at 108.08. The yen has traded mixed in narrow ranges against other currencies, ebbing versus the commodity currencies while gaining modest ground versus the euro and some other currencies. The Japanese currency has been little impacted by a rotation high in global stock markets, sparked by U.S. President Trump saying that U.S. states can reopen in a three-staged process, joining a number of other countries that are already amid the first, cautious phase of unlocking their economies. This helped markets overlook China's GDP plunge of 6.8% y/y, the first contraction on record but hardly surprising given the draconian virus-containing measures taken in the country for much of the first quarter. There has been lots of talk about a V-shaped recovery, though 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 this week highlighted that the return to normal may be a long road, saying (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." Such a backdrop would keep the yen broadly underpinned. We continue to anticipate USD-JPY trading at sub-100.00 levels.

                      [GBP, USD]
                      Cable has above yesterday's eight-day low at 1.2408, though lower after capping out a 1.2522. Sterling has continued to correlate positively with global stock market direction to quite a large extent, which has been the pattern the UK currency has established during the pandemic era. The pound is down by about 6% against the dollar on the year-to-date, and down versus most of the other main currencies, although has still gained versus the commodity currencies and other high-beta units over this period. On the Brexit front, a spokesman for the UK prime minister, who it still recovering from Covid-19, said yesterday that the pandemic has strengthened the need or the UK to be free of EU regulation after 2020, emphasizing that there will not be any extension to 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. This comes with negotiations, which have been hobbled by the coronavirus crisis, set to resume next week. The UK has only until July 1st to decide on whether to extend the transition period or not, and the two sides have not so far managed to narrow any of their differences on key sticking points. The general view among political pundits is that the UK is hoping the tight timetable, and tactics such as so-far failing to product a draft text on issues such a fisheries, will put pressure on the EU during negotiations. Contrary to the expectation in Brussels, and of many onlookers, the UK government is continuing to play hardball despite the disrupting impact of the pandemic, indicating that it is willing to leave the EU without a deal -- i.e. pull the trigger on the hard Brexit option. The risk is that the EU will call its bluff, as the economic consequences would be harder felt in the UK than in the EU. Tipping out of the transition period without a deal would result in the UK economy trading on less favourable WTO terms. The Centre for Economic Performance estimates that such a shift would reduce UK trade with the EU by 40% over 10 years, while also causing slowing in investment and productivity growth.

                      [USD, CHF]
                      EUR-CHF yesterday tested 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 edged out a two-day low, at 1.4003. The Canadian dollar has been modest outperformance since U.S. President Trump said that U.S. states can reopen in a three-staged process, joining a number of other countries that are already amid the first, cautious phase of unlocking their economies. This sparked a rally on global stock markets. But, oil markets haven't felt the good vibes, with sentiment remaining preoccupied by the massive demand/supply imbalance. Front-month WTI futures declined by over 4% in posting a new 21-year low at $18.96. This is telling of the fact that the return to economic normalcy is likely to be a long road. We retain a bullish view of USD-CAD.

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