GBP>EUR – 1.0979
GBP>USD – 1.2721
EUR>USD – 1.1586
GBP>CAD – 1.7010
GBP>AUD – 1.7772
GBP>SEK – 11.241
GBP>AED – 4.6726
GBP>HKD – 9.8550
GBP>ZAR – 20.930
· AUD RBA Meeting Minutes
· AUD RBA’s Governor Lowe speech
· CAD Retail Sales (MoM)(May)
- EUR Up-trend continues but Sino-US tussle & Corvid-19 may cap gains
- GBP Holds despite China & Brexit headlines
- USD Decline continues on US-Sino tensions and Corvid-19
- GOLD Steady near multi-year tops
Cable has remained buoyant, settling in the lower 1.2700s, below Tuesday’s six-week high at 1.2768. The pound has been trading more mixed against other currencies following a bout of underperformance yesterday on the Brexit news. To recap, the UK’s Telegraph reported that the UK government is pessimistic about reaching a trade deal with the EU, just days before Prime Minister Johnston’s end-of-July deadline for reaching a deal in principle. The FT concurrently reported, citing unnamed senior government officials, that the government has abandoned hopes for reaching a trade deal with the U.S. before the presidential election in November, which means that there will be zero hope for a deal by the time Britain leaves the EU’s single market at the end of the year. The pandemic got the blame for the slow progress in discussions with the U.S. The reports do seem to have a ring of truth, even allowing for the possibility that the government might be trying to put on a show to the EU — a negotiating tactic that signals it isn’t bluffing about leaving the single market without a new trade deal. This would mean the UK is heading for trade on WTO terms, which would cast less favourable terms on much of the UK’s international trade from January 1st next year. The spectre of this should render the pound apt to appearing on the underperforming list of currencies, especially with the UK economy lagging relative to peers in the recovery from lockdown.
The dollar has continued to track lower, despite a backdrop of flagging stock markets in Asia, although U.S. equities closed with moderate gains yesterday and S&P 500 futures are showing a modest rise in overnight trading. The narrow trade-weighted USD index (DXY) printed a fresh four-and-a-half-month high at 94.82, drawing in on the early March low at 94.66, which was the lowest level seen since August 2018. EUR-USD has been buoyant, though has remained below the 21-month high that was printed yesterday at 1.1601. The pair is amid its fifth week of an accelerating rally phase, underpinned both by broader dollar weakness (amid shifting risk premia in global markets) and broader euro outperformance (on the back of the EU recovery fund, seen as reducing Eurozone breakup risk while creating a new liquid AAA fund that will attract foreign investment). The common currency has been gaining against most other currencies recently, outside the case against the outperforming commodity currencies. The research team at Goldman Sachs is anticipating a further 10% gain in the euro. EUR-JPY has seen a similar price action to EUR-USD today, in holding off yesterday’s seven-week peak. Other euro crosses have also been steady. Elsewhere, USD-JPY has continued to ply a narrow range near the 107.00 level. Cable remained buoyant, settling in the lower 1.2700s, below Tuesday’s six-week high at 1.2768. The pound has been trading more mixed against other currencies. AUD-USD has settled near 0.7150, so far holding below the 15-month high seen yesterday at 0.7183. A sharp drop in Australia’s Q2 business confidence survey had been widely anticipated, as was a downbeat economic update of the Federal government. USD-CAD posted a fresh six-week low at 1.3378, with the Canadian dollar firming concomitantly with oil prices. Front-month WTI futures lifted back above $42.0, drawing back in on Tuesday’s four-and-a-half-month high at $42.40. Geopolitics remains a concern. China blacked out English premier league games on Chinese television and closed the U.S. consulate in Chengdu in retaliation for the White House closing the Chinese consulate in Houston.
XE Market Analysis Europe – 23rd Jul 2020
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