FX & market recap:
Markets are giving a “Goldfinger” to the US dollar, and James Bond is missing in action. Zero-interest rate policy (ZIRP), and Negative interest rate policy (NIRP) eliminated a major barrier to owning gold (XAU/USD), helping to drive prices higher.
The dysfunctional US Congress is grandstanding its way to another economic calamity, and investors want a safe haven. Elevated geopolitical tensions and what appears to be the American’s quasi-nationalization of a foreign company are adding to XAU/USD demand. Asia equity indexes closed on a mixed note, while European bourses are higher. US equity futures are pointing to another positive Wall Street open. US ISM Non-manufacturing and ADP payrolls reports are on tap.
Canadian dollar highlights:
USD/CAD dropped, mirroring the antipodean moves, and getting a bit of a lift from a rise in crude prices. USD/CAD blasted below support in the 1.3310-30 zone, triggering stop-loss selling in the process. The technical outlook is bearish, but USD/CAD sellers may want to rethink their positions ahead of Friday’s US and Canadian employment reports.
Canada Merchandise Trade data is expected to show the deficit widening from -$0.680 billion to $0.9 billion, which will be explained away by ongoing COVID-19 issues.
EUR/USD traded with a positive bias in a 1.1795-1.1828 band in Asia, before accelerating higher to 1.1861 in early NY trading. Another strong Eurozone Retail Sales (5.7% m/m) report, following the 20.5% gain in May triggered the spike to the top of the range. However, some analysts suggest the gains won’t be sustained as these results reflect pent-up demand due to the previous lockdowns. Composite and Services data were mixed but both in expansion territory.
British pound highlights:
GBP/USD continues to rally with the uptrend from the middle of July intact above 1.3000. Traders continue to ignore concerns about a second wave of coronavirus infections forcing the government to delay further economy reopening plans. Prices were supported by UK Services PMI data at 56.5 compared to 47.1, the sharpest rate of growth in five years.
Asia Pacific highlights:
USD/JPY traded with a modestly bearish bias, thanks to the US political dysfunction, but returned to the top of its 105.52-105.79 range in NY trading. Prices got a bit of a lift after US 10-year treasury yields climbed off 0.508% and touched 0.531%.