FX & market recap:
FX markets ran hot and cold overnight. Asia traders were in risk seeking mode and bought stocks, and commodity bloc currencies. European traders saw it differently drifted into risk-aversion trades. It was a slow start to the week and traders are second-guessing themselves, perhaps wondering why record job losses in Canada and the US warrants a nearly 2% rally in the Dow Jones Industrial Average.
Markets are getting nervous about the risks of a COVID-19 round 2 outbreak as governments begin to ease lockdown restrictions. The PBoC hinted that further stimulus measures are likely, by deleting the word “prudent” from its first quarter monetary policy report.
Canadian dollar highlights:
USD/CAD dropped after Stats Canada reported that 2 million jobs disappeared in April, which is hardly a normal reaction to a record-breaking negative report. Traders appear to be coming to their senses as USD/CAD climbed steadily from the European low of 1.3907 to 1.3987 in early NY trading. USD/CAD direction is at the mercy of broad US dollar sentiment, with domestic factors having little influence.
Traders are not motivated to get involved and a lack of actionable data, or new central bank actions has underpinned the greenback. EUR/USD drifted lower in a 1.0810-50 range, rising in Asia, dropping in Europe, and inching higher in early NY trading.
British pound highlights:
GBP/USD mirrored Euro moves. Those traders are awaiting Prime Minister Boris Johnson’s statement today, on the plan to reopen the UK economy.
Asia Pacific highlights:
USD/JPY was in demand to start the week and it stayed bid into the NY session. Prices continue to be supported by the sharp rise in US Treasury yields. Meanwhile, AUD/USD and NZD/USD erased Asia session gains in Europe and opened in NY with losses against the US dollar. Traders are leery as New Zealand is preparing to ease lockdowns further, and the RBNZ policy meeting is due on Wednesday.