GBP>EUR – 1.1091
GBP>USD – 1.2688
EUR>USD – 1.1437
GBP>CAD – 1.7126
GBP>AUD – 1.7981
GBP>SEK – 11.358
GBP>AED – 4.6592
GBP>HKD – 9.8320
GBP>ZAR – 21.000
· AUD RBA Meeting Minutes
· AUD RBA’s Governor Lowe speech
· CAD Retail Sales (MoM)(May)
- EUR Pops and drops as EU reaches fiscal deal
- GBP Battles, focus on Brexit & US-UK trade talks
- GOLD Rally to extend dollars weakness
- Forex Today USD starts the week with the wrong foot
The pound has rallied today, again displaying its pandemic era proclivity to positively correlate with global stock markets. Cable hit a six-week high at 1.2698, while EUR-GBP dropped to an eight-day low at 0.9012 (1.1096), extending a sharp correction from the three-week peak that was seen yesterday at 0.9140 (1.10941). The drop in EUR-GBP has in part been fuelled by profit-taking of euro longs as EU leaders reached a compromise on the EU recovery fund. The pound remains the weakest currency on the year-to-date out of the currencies we keep tabs on, currently showing an average decline of over 5.5% against the dollar, euro and yen, and an average 3% fall versus the commodity-correlating dollar bloc currencies. The UK has been comparatively exposed to the pandemic and lockdowns, having an open economy with a large current deficit and large financial sector. The hard-hit leisure and hospitality sectors, which are proportionately bigger in the UK than most peers, is also a factor, and many economists are anticipating a consequently lagging economic recovery. Then there is the yet-to-be-finalized Brexit issue. The UK is on a course to leave the EU’s single market by year-end, irrespective of whether a trade deal is reached with the EU. Officials involved in negotiations have continued to report that they remain deadlocked over key issues. While there have been reports of “landing zones” on difficult issues coming into view, there have also been reports that the UK government is planning free ports and competitive tax cuts, which would rule out any chance of a broad trade deal being made. Discussions are scheduled to continue through to the end of the month before resuming on August 17th. October is being touted as the deadline.
The narrow trade-weighted USD index edged out a fresh three-and-a-half-month low at 95.65, which is a culmination of a clear three-week downtrend. The euro is trading at modestly softer levels against the dollar and most other currencies, with the forex market looking to have priced-in the green lighting of the EU recovery fund. EUR-USD has settled around 1.1450, below the three-and-a-half-month peak seen yesterday at 1.1469. EUR-JPY has concurrently settled off yesterday’s six-week high, while other euro crosses, most notably EUR-GBP, have also ebbed from highs. The pound has rallied today, again displaying it is pandemic era positive correlation with global stock markets. Cable hit a six-week high at 1.2698, while EUR-GBP dropped to an eight-day low at 0.9012. USD-JPY has been buoyant, though has remained below the 13-day high that was seen yesterday at 107.53. The risk-sensitive AUD-JPY cross, meanwhile, lifted to a six-week high at 75.46, underpinned by rallying global stock markets amid signs that EU leaders are in the home stretch to approving the 750 bln euro recovery fund. Recent positive news about trails in candidate vaccines for the coronavirus has also been lifting investor spirits. The MSCI Asia-Pacific index rallied by over 1.5%, nearing the four-month highs seen earlier in July. The S&P 500 index rallied to a five-month peak on Wall Street yesterday, and S&P 500 futures are showing gains of over 0.5% in the overnight session. AUD-USD printed a six-week high at 0.7048. USD-CAD dipped under 1.3500 for the first time since June 11th, making a low at 1.3498. This was concomitant with front-month WTI oil futures lifting back above $41.00, drawing back in on the four-week high at $41.26.
XE Market Analysis Europe – 21st Jul 2020
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