01/ 07/ 2020

Dollar holds gains before major economic data

The dollar held onto gains against the yen earlier today ahead of data expected to show U.S. manufacturing activity and hiring continued to recover from the economic shock caused by the coronavirus pandemic. A surge in coronavirus infections in the U.S. south and southwest has worried some market participants, but most investors are betting this will not be enough to derail a broader rebound in the global economy. "The dollar will be supported against the yen if U.S. economic data are positive, but U.S. yields are not rising much because of speculation about yield curve control," said Shusuke Yamada, head of foreign exchange and Japan equity strategy at Merrill Lynch Japan Securities.

The euro was hemmed into a narrow range as trader’s awaited data on Germany's manufacturing sector, retail sales, and the jobless rate to gauge the health of the Eurozone economy. The euro looks stable, but there are questions about Brexit and the pace of economic reopening, which means the euro could soon be overvalued.

Looking ahead, the day will be full of holidays from Hong kong, Canada and Russia. Economic data, COVID-19 updates, and the FOMC minutes will influence on the day.

30/ 06/ 2020

It’s a Busy Day Ahead, with Economic Data Putting the Majors in Focus

The dollar fell on Monday as stocks opened higher, indicating improving risk sentiment despite a rise in coronavirus cases. Wall Street’s gain came after a sharp drop on Friday. “It’s a weak start for the U.S. currency, I think it’s mostly risk on,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. Investors have been weighing better economic data against a new uptick in COVID-19 infections. The global death toll from the virus reached half a million on Sunday, according to a Reuters tally. Cases surged in Southern and Western U.S. states, prompting California to order some bars to close in a rollback of efforts to reopen the economy.

Sterling weakened to a one-month low against the greenback on concerns about how Britain’s government will pay for its planned infrastructure program. There are also doubts about whether Britain will seal a trade pact with the European Union as little progress has been made in agreeing Britain’s future relationship with the bloc, which it exited on Jan. 31.

It’s a busy day ahead, with economic data, talk of stimulus, geopolitics, and COVID-19 updates to provide the majors with direction.

29/ 06/ 2020

Week Ahead | COVID-19, Trump, and a Busy Economic Calendar in Focus

The conditions for risk reversal continued to build up last week and somewhat intensified. On the one hand, daily new coronavirus cases surged to new high for the world, as well as for the US. Daily global new deaths were steady and the US death tolls trended down. Yet, the development is enough for worries on at least a delay in reopening, with risks of reversing ease of restrictions.

On the other hand, the stage was also set for an acute deterioration in US-China relations. Senate passed the so called Hong Kong Autonomy Act by unanimous vote on Thursday. Secretary of State Mike Pompeo also announced on Friday visa restrictions on Chinese Communist Party officials believed to be responsible for undermining freedoms and autonomy in Hong Kong. The CCP is set to ignore global condemnations and impose new “national security” laws on Hong Kong by this week, bypassing they city’s own legislature. That would in turn very likely trigger new sanctions from the US, and possibly from other countries too.

In spite of the developments, risk reversal is not clearly confirmed yet. US stock indicates could merely be extending near term consolidations. There was no sustainable buying in Dollar, nor Yen. Gold’s up trend resumption could be a sign, together with the break of near term support in GBP/CHF and EUR/CHF. Yet, more levels need to be taken out before confirming the comeback of risk aversion.

It’s a busy week ahead. As the markets look to wrap up the 2nd quarter, COVID-19 and geopolitics may well overshadow any positive data in the week.

25/ 06/ 2020

Dollar gains on coronavirus, tariff concerns

The euro dipped against dollar on Wednesday as investors turned cautious following a surge in the number of coronavirus cases globally.  Many U.S. states reported record daily increases in COVID-19 infections amid easing of lockdowns, while a media report that European Union countries are prepared to bar entry to Americans raised worries of further restrictions. Sterling declined against dollar as sterling was weighed down by uncertainty over Brexit negotiations even after global risk appetite got a boost from positive economic data as countries ease their lockdowns. For the past two days, the pound had risen against a weaker dollar.

While dollar edged higher against the Japanese yen yesterday as rise in coronavirus cases in the United States weighed on optimism about a quick economic recovery, and as the U.S. weighed tariffs on European products. The coronavirus pandemic is causing wider and deeper damage to economic activity than first thought, the International Monetary Fund said on Wednesday, prompting the institution to slash its 2020 global output forecasts further. Concerns about an increase tariffs also weighed on risk sentiment, and boosted demand for the greenback.

Markets could be in for another choppy day ahead as we will see another rise in the latest COVID-19 cases and could hear more from Trump on tariffs. Expect any talk of reintroducing any lockdown measures to weigh heavily on risk appetite.