FX & market recap:
It’s a risk-seeking world. Well, it started that way. However, since NY opened, a bout of profit-taking has lifted the US dollar off its lows, against the major G-10 currencies. Yesterday, Wall Street closed with strong gains, fueled by hopes the easing of COVID-19 lockdown restrictions would lead to a sharp economic rebound. The Fed’s Zero Interest Rate Policy (ZIRP) has investors hunting for yield, while blissfully ignoring civil unrest sweeping across America. American’s with free cash after buying guns and ammo are buying stocks. The Dow Jones Industrial Average closed with a 1.02% gain yesterday, which set the stage for Asia and European equity indexes to rally. The Nikkei closed, up 1.29% while Germany’s DAX is up 2.0% so far this morning.
The US ADP report is due today, and although a poor indicator of NFP, FX markets occasionally react to the data. ISM Non-Manufacturing PMI is forecast to rise to 44 from 41.8.
Canadian dollar highlights:
USD/CAD bounced off its overnight low of 1.3482 and touched 1.3556 in early NY trading, following a bout of profit-taking US dollar buying vs the G-10 majors. Today’s BoC meeting is expected to be a non-event. Rates and monetary policy will be left unchanged as officials wait to see the results of their earlier stimulus measures.
EUR/USD continues to climb, rising from 1.1168 to 1.1227. Better than expected Eurozone unemployment (actual 7.3% vs forecast 8.2%), combined with slightly better (but still weak) Services and Composite PMI data, underpinned prices. However, it is the hope for the proposed EU COVID-19 Relief Fund, and more aggressive ECB monetary stimulus measures announced Thursday, that is fueling the gains.
British pound highlights:
GBP/USD is mirroring EUR/USD moves. The short-term technicals are bullish above 1.2250, with the break above 1.2510, targeting 1.2780. UK Services PMI was a pathetic 29 but ignored by traders because it was a tick better than the 27.8 seen in April. GBP/USD continues to rise despite reports the EU/UK trade talks are at an impasse.
Asia Pacific highlights:
USD/JPY consolidated yesterday’s gains in a 108.43-108.84 range. Prices were underpinned by positive risk sentiment, the China PMI data indicating a post-pandemic rebound, and rising US Treasury yields. 10-year US Treasury yields climbed from 0.65% yesterday to a peak of 0.714% today.