FX & market recap:
FX markets were an oasis of calm overnight, a nice reprieve from the turmoil earlier this week. White House Advisor Peter Navarro caused a kerfuffle in Asia Tuesday after he declared the US/China Phase 1 trade deal was over. The panic buying of US dollars and selling of stocks ended as quickly as it started after President Trump tweeted that Navarro was an idiot and shouldn’t have said what he said. Ok, that’s not true. Trump wrote: “The China Trade Deal is fully intact. Hopefully, they will continue to live up to the terms of the Agreement!”
Navarro and economic data were merely sideshows to COVID-19 developments that were the main attractions. Reports of a record number of new COVID-19 cases (39,327 0n Thursday) sparked safe-haven demand for JPY, CHF, and USD. Wall Street sank on Wednesday but recouped almost half of the losses on Thursday. Risk sentiment is negative after the spike in coronavirus cases forced many US states to pause their reopening plans, including Texas and Florida.
The US Michigan Consumer Sentiment index and PCE data are on tap today. Month-end and quarter-end portfolio re-balancing flows may start to disrupt FX markets today.
Canadian dollar highlights:
USD/CAD was the best performing G-10 currency pair overnight, and this week. In addition to the broad US dollar demand from renewed risk aversion sentiment, USD/CAD is underpinned by the retreat in WTI oil prices, and by the Fitch Ratings Inc downgrade of Canada’s debt.
EUR/USD is trading near the top of its narrow overnight range of 1.1306-1.1338. The single currency is directionless inside a broader 1.1140-1.1360 band. ECB President Christine Lagarde said: “We probably have passed the lowest point. I say that with some trepidation because of course there could be a severe second wave if we learn anything from the Spanish Flu.”
British pound highlights:
GBP/USD traded in a 1.2377-1.2436 band, garnering a modicum of support with the start of new EU/UK trade talks on Monday.
Asia Pacific highlights:
USD/JPY is trading at the bottom of its overnight, 106.87-107.23 range. Safe-have demand for yen due to the resurgence of US COVID-19 cases and slightly softer US Treasury yields undermined prices.