FX & market recap:
“Risk-on” traders had a pick of poisons to ruin their day. Escalating China and US tensions, a lack of progress on the next round of US fiscal stimulus, rising coronavirus cases in the US, and a 4.39% plunge in China’s CSI 300 index were all reasons to lighten up on the so-called risk assets. So, they did.
The US dollar opened in New York with gains against the major G-10 currencies. However, the overnight US dollar strength barely dented the losses it suffered since Monday’s NY open. The Swiss franc led the G-10 majors higher, while gold prices rose 4.5% and came within inches of the “magic” $2000.00 level.
China ordered the US consulate in Chengdu closed, in a tit-for-tat retaliation for its Houston consulate being ordered to close. China’s problems with the US seem to rise in direct proportion to the size of “Sleepy-Joe” Biden’s lead over President Trump in election polling.
Canadian dollar highlights:
USD/CAD sold-off yesterday but ran into a wall at 1.3350. Prices rose and closed at 1.3408. They continued to climb and are trading in NY above their opening levels. USD/CAD direction is being dictated by Wall Street and whatever risk-sentiment is in vogue now. Currently, “risk-off” is the theme.
EUR/USD continues to hang around the 1.1600 area. Yesterday the single currency ran out of steam at 1.1624 and today, bounced in a 1.1591-1.1621 range. Prices were underpinned by better than expected Eurozone PMI data. Markit Manufacturing PMI for July rose to 51.1 and Services PMI to 55.1. German Manufacturing PMI straddled the growth/contraction line coming in at 50. Lingering support from the EU COVID-19 Relief Fund deal, the resumption of the coronavirus crisis in the US, and the breach of the long-term EUR/USD downtrend line are supporting the currency.
British pound highlights:
GBP/USD chopped about in a 1.2719-1.2772 range with prices supported by widespread, bearish US dollar sentiment. UK June Retail Sales rose 13.9%, and Markit Manufacturing PMI climbed to 53.6, in June. The data is discounted, as it is distorted from coronavirus lockdown measures. It appears that traders have dispensed with concerns about the UK failing to agree to a trade deal with the EU, at least this week.
Asia Pacific highlights:
USD/JPY dropped from 106.88 to 106.18 on renewed risk-aversion sentiment. Prices broke support at 106.50, leaving traders looking for a break of 1065.00 to extend losses to 104.60. AUD/USD and NZD/USD dropped overnight and are well below their peak levels reached Wednesday.