FX & market recap:
There is not any shortage of tensions in the world. The Global Council on Foreign Relations identifies five areas having a critical impact on US interests. Two of them deal with China’s exploits in the East and South China Sea. Two more include Islamic militancy in Pakistan and Iran, against the US. The Russia/Crimea dispute is also flagged. Then there is the issue of escalating trade tensions between China and the US, China, and Australia, alongside a political spat between China and Canada. The EU and the US trade talks are ongoing under the threat of US tariffs. EU and UK trade negotiations are another critical issue. Then there is the pandemic.
Canadian dollar highlights:
The Canadian government is spending money it doesn’t have. For the past seven weeks, Prime Minister Justin Trudeau has taken a daily stroll to a podium outside his residence where he announces multi-billion-dollar spending programs. So far, he has blown through $240 billion. Oil prices continue to climb on the back of production cuts. USD/CAD dropped due to the widespread US dollar selling, supported by bearish short term technicals, and higher oil prices. Tomorrow's Bank of Canada meeting is viewed as a “non-event,” especially since there is not a press conference.
EUR/USD traded sideways in Asia and the spiked to 1.1187 from 1.1116 in Europe after the German announcement of new fiscal stimulus. Prices are supported by hopes the proposed €825 billion COVID-19 Relief Fund is passed by the EU, and by bullish technicals targeting a test of 1.1290.
British pound highlights:
GBP/USD rallied on the back of broad US dollar selling, rising from 1.2480 to 1.2575, before drifting down to 1.2540 in NY trading. Prices are underpinned by the 1.02% rise in the FTSE 100 index. Gains were capped due to the ongoing EU/UK trade talks and the rising risk of a no-deal Brexit.
Asia Pacific highlights:
USD/JPY is trading at the top of its overnight range, on the back of broad US dollar weakness and concerns that the US riots will hamper the post COVID-19 recovery. AUD/USD and NZD/USD rallied, with Aussie getting an added boost from the RBA. The RBA left rates and policy unchanged, but the statement was modestly positive. The statement suggested that the economic downturn would be less severe than expected.