FX & market recap:
FX traders took their time before warming up to the news the EU agreed to a multi-year budget and the €750 billion COVID-19 Relief Fund. But when they warmed up, they really started cooking. EUR/USD soared from 1.1424 to 1.1571 in NY trading today. Meanwhile, the US deficit is exploding with another $1.0 billion or so, in new funding announcements coming down the pipe. The US ordered China to close its Houston Consulate office, further escalating US/China tensions and bolstering EUR/USD as a safe haven. The US May Housing Price Index is forecast to rise 0.3% m/m.
Canadian dollar highlights:
USD/CAD is the laggard of the G-10 currency spectrum. Even as the antipodean currencies soar, USD/CAD cannot get much downside traction, in part because of expectations that Canada’s post-COVID-19 economic rebound will be uneven and shallower than that of its G-10 peers. Today’s Canada CPI data (forecast 0.4% m/m) will be a non-event, as it won’t have any impact on near term Bank of Canada monetary policy.
The EUR/USD rally served to snap the downtrend from May 17, 2018, with a decisive break above 1.1505, targeting 1.2150, The bearish sentiment is fueled by the belief that the Euro area has the coronavirus under control, while the US is behind the curve. The EU action, which opened the door to EU back bonds, is seen as enhancing fiscal support to the Euro area.
British pound highlights:
GBP/USD had a wild twenty-four hours. It rose from a low of 1.2675 post-EU Summit news and rallied to 1.2765 in the NY afternoon. Prices traded sideways in Asia but dropped when London opened, falling from 1.2725 to 1.2639 before bouncing to 1.2682 in NY. Why all the excitement? No reason.
GBP/USD is benefiting from bearish US dollar sentiment while ignoring yesterdays reports that the UK government is giving up on hopes for a Brexit deal before the end of the year.
Asia Pacific highlights:
USD/JPY dropped from 107.30 after the EU to 106.67 then traded in a 106.67-106.88 range in Asia. Soft US Treasury yields and US coronavirus concerns are weighing on prices. Meanwhile AUD/USD bounced like a kangaroo on steroids. It has risen 2.8% since Monday on the back of bullish data, a tame central bank, and bearish US dollar sentiment. A 2.4% rise in domestic retail sales underpinned the gains.