GBP>EUR – 1.1060
GBP>USD – 1.2985
EUR>USD – 1.1742
GBP>CAD – 1.7422
GBP>AUD – 1.8198
GBP>SEK – 11.402
GBP>AED – 4.7698
GBP>HKD – 10.064
GBP>ZAR – 21.810
- EUR Bulls in con troll, focus on German & US GDP
- GBP Retraces from the top, US GDP eyed
- USD Focus on Q2 GDP
- GOLD What is next?
Cable sank back under 1.2950 after peaking at 1.3013, which is the loftiest level seen since the pre-lockdown days of early March. Sterling has been in the outperforming lane over a previous couple of days, though still registers as the weakest of the main currencies on the year-to-date, and by some distance in trade-weighted terms, while recent dollar underperformance has been somewhat flattering the pound. Nevertheless, there are some convincing bullish arguments in market narratives. One is the pick-up in the pace of economic recovery in the UK, as evidenced by the much stronger than forecast preliminary July PMI data (outperforming Eurozone PMIs and showing the private sector to be back in expansion for the first time since lockdown) and the CBI’s July distributive sales report, which flagged a nearly full recovery in the retail sector (by rising to a +4 headline, up from -37 in June and the best reading since April last year, with sales in upcoming months seen at near seasonal norms). There have also been signs that have led markets to factor improved odds for an EU-UK trade deal. An FT article this week asserted that the EU is willing to drop its demand that the UK accepts EU state-aid rules and oversight of the ECJ (European Court of Justice), and that “while further work is needed, a middle ground is emerging”. This followed a Reuters report earlier in the week that EU trade negotiator Barnier believes UK PM Johnson wants a deal, despite the UK government’s often repeated assertion that it’s willing to take the UK out of the single market at year-end without a new trade deal if it doesn’t get what it wants. Analysts see scope for Cable returning to levels around the 1.3500 mark
The dollar has managed a rebound from post-Fed lows, with the narrow trade-weighted USD index lifting above 93.50 after pinning a fresh 25-month low at 93.18. Fed Chairman Powell gave an unambiguously strong commitment to continued ultra-accommodative policy (“not even thinking about thinking about thinking to raise rates”), though there were no changes in terms of the 0%-0.25% rate band, QE, or hints on forward guidance. USD-JPY recouped to a two-day high at 105.29 after printing a five-month low at 104.76 in the wake of the Fed. The pair’s recovery today in Asia has been concomitant with rallying stock markets, which has fostered a rotation out of safe-haven positions in the Japanese currency. The yen remains among the currency outperformers this week, alongside the euro and pound. EUR-USD ebbed back to the mid-1.1700s after printing a new 22-month peak at 1.1805. Cable sank back under 1.2950 after peaking at 1.3013, which is the loftiest level seen since the pre-lockdown days of early March. The commodity currencies stand out for underperforming today, despite the backdrop of mostly higher stock markets in Asia, which underscores the profit-taking theme in forex markets after a phase of shorting dollars into the FOMC. Both AUD-USD and NZD-USD have racked up declines of over 0.6%, with the former pegging a two-day low at 0.7132 after peaking at a 15-month high at 0.7196 in the wake of the Fed announcement. USD-CAD lifted by 0.5% in posting a two-day high at 1.3404. Oil prices have continued to ply a narrow range off recent five-month highs. Gold prices retreated after making a fresh nominal record high yesterday at $1,974.90. S&P 500 futures have dropped by 0.6% in overnight trading after the cash version of the index closed on Wall Street yesterday with a 1.2% gain. The focus in the U.S. now switches to the final phase of political wrangling over the next fiscal package. Concerns about the impact of localized lockdown measures, particularly in the U.S.
XE Market Analysis Asia – 30th Jul 2020
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