GBP>EUR – 1.1080
GBP>USD – 1.3063
EUR>USD – 1.1788
GBP>CAD – 1.7461
GBP>AUD – 1.8293
GBP>SEK – 11.408
GBP>AED – 4.7975
GBP>HKD – 10.121
GBP>ZAR – 22.540
|This Week’s Calendar
· AUD Trade Balance (Jun)
· UD RBA Rate Statement
- US Manufacturing data shows a drop in employment
- GBP cautious optimism probes bears
- Focus RBA meeting
- Gold Bull’s eye $2000 amid record low USD yields, favourable technicals
Cable has made a rebound peak at 1.3089 after setting a five-day low at 1.3004 yesterday. The UK currency has been directionally more neutral against the euro and most other currencies. The pound outperformed last week, 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 had been somewhat flattering the pound. Helping the pound last week were signs that have led markets to factor improved odds for an EU-UK trade deal, with several sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. Narratives last week had also been noting a pick-up in the pace of economic recovery in the UK, though final July manufacturing PMI was unexpectedly revised lower while localized lockdowns, including in the economically-important Manchester area, and the continued media-driven “feardemic,” is clouding the outlook for the UK economy at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers has been reduced). The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintaining the ultra-accommodative policy. The central bank will also release its quarterly policy review with revised growth and inflation forecasts.
The dollar has been ebbing moderately lower into the London interbank open, though has largely remained above lows seen on Monday. The USD index (DXY) drifted to a 96.43 low after yesterday’s rebound capped out at a six-day high at 93.99. This has come amid a risk-on backdrop, which has propelled the MSCI Asia-Pacific index to gains of over 1%, along with lifting the U.S. and European equity index futures. Strong manufacturing data out of the U.S. and elsewhere yesterday, continued gains in tech stocks, and Germany’s Ifo institute stating that there are signs of recovery in the auto manufacturing industry, have been a bullish tonic for asset markets, offsetting the stalemate on Capitol Hill over the next pandemic fiscal support bill and anxieties about Hurricane Isaias. New Jersey governor has declared a state of emergency as the U.S. Atlantic coastal states brace for the storm. EUR-USD lifted moderately, posting an intraday high at 1.1778, extending the rebound from yesterday’s eight-day low at 1.1696. Cable saw a similar price action, making a rebound peak at 1.3089 after setting a five-day low at 1.3004 yesterday. USD-JPY plied a narrow range just above the 106.00, holding well within Monday’s range. AUD-USD lifted to an intraday high at 0.7146, which is 9 pips shy of yesterday’s peak. The RBA left its cash rate unchanged following its August policy review today and announced a resumption in bond buying from tomorrow “to ensure the yield on 3-year bonds remains consistent with the target” of around 25 bp. The RBA adopted yield curve control back in March. Regarding the outlook, the central bank highlighted a likely “uneven and bumpy” recovery in the state of Victoria, which has gone lockdown in response to a flare-up in coronavirus cases. Elsewhere, USD-CAD ebbed to a five-day low at 1.3358. Front-month WTI crude prices remained buoyant after yesterday hitting a five-day high at $41.22. Gold prices settled about $10-$15 off yesterday’s nominal record high at $1,997.00.
XE Market Analysis Europe – 4th Aug 2020
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