GBP>EUR – 1.1028
GBP>USD – 1.2961
EUR>USD – 1.1754
GBP>CAD – 1.7292
GBP>AUD – 1.8045
GBP>SEK – 11.333
GBP>AED – 4.7597
GBP>HKD – 10.042
GBP>ZAR – 21.280
|This Week’s Calendar
· USD Fed’s Monetary Policy Statement
· USD FOMC Press Conference
- EUR Bulls take a breather ahead of Fed
- GBP Portrays the pre-Fed trading lull
- GOLD Upside favoured ahead of Fed
- USD Fed front-runs FOMC, risk of further dollar losses?
Cable has settled in the lower 1.2300s, below the near five-month high seen Tuesday at 1.2953. The pounded lifted against most currencies yesterday, inspired by an FT article asserting 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, according to unnamed sources who attended a closed-door briefing he gave to national envoys of the EU 27. This is despite the UK government’s often repeated assertion that it is willing to take the UK out of the single market at year-end without a new trade deal if it does not get what it wants. The Reuters sources cited also said that the Irish and Dutch representatives were also upbeat about the chances of a deal being made (Ireland and the Netherlands being the two EU nations proportionately most exposed to UK trade). The final round of EU-UK trade talks before the summer break is taking place in London this week. The deadline for reaching a deal before the UK leaves the single market at year-end is October, and things are not likely to get interesting until then. The pound remains the weakest of the main currencies on the year-to-date, so there is scope for sustained gains if markets perceive the odds for a deal are improving. Uncertainties remain, however, particularly on how broad any deal would be.
The dollar is amid a second of trading steadily, consolidating the sharp declines seen over the prior 10 days. The narrow trade-weighted USD index has posted a 93.60-80 range so far today, holding within yesterday’s range and above the 25-month low that was seen on Monday at 93.68. EUR-USD is showing modest gains, though has also remained with its Tuesday range and below the 22-month high see yesterday at 1.1782. Cable has settled in the lower 1.2300s, below the near five-month high seen Tuesday at 1.2953. AUD-USD whittled out a fresh high at 0.7179 but remained just off from the 15-month peak seen last week at 0.7183. USD-CAD settled near the 1.3450 mark, above Tuesday’s seven-week low at 1.3329. USD-JPY remained heavy, but so far managing to hold just above yesterday’s near five-month low at 104.93. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the dollar and New Zealand dollar, with just over a 2% advance versus both underperformers. The sputtering price action in global equity markets has driven safe-haven demand into the yen, with the dollar perceived to be no longer providing protection. Profit-taking and position trimming have been a theme across markets over the last day into the Fed’s policy announcement and the final week of political wrangling over the next U.S. fiscal package (there is some uncertainty about outcomes of both, or at least in terms of signalling concerning the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections, alongside geopolitical tensions, have also been in the mix. Regarding the Fed, no policy changes are expected, though forex markets will be laser-focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the dollar, further.
XE Market Analysis Asia – 29th Jul 2020
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