FX & market recap:
The USD closed lower against most of its major currency peers Tuesday and retains a soft undertone in mostly quiet trade on the day so far as markets await comments from Fed Chairman Powell; it’s hardly likely that the Chairman can do more to disavow the likelihood of negative rates than his colleagues have done already this week but markets are reluctant to give up on the idea and the theme seems to be catching on elsewhere.
Canadian dollar highlights:
The CAD is easing back from its overnight low against the USD on little more than a minor bounce in US equity futures and a rebound in WTI from the early European low. The CAD remains something of a hostage to broader risk appetite and swings in sentiment around economic re-opening. Most continue to think that USD/CAD will pivot around the 1.40 level while investors ponder the global response to the pandemic.
The EUR is relatively unchanged from yesterday’s close as it trades around the 1.0850 mark after a minor dip to near 1.0830 in the early hours. Euro price-action catalysts were few and far in between overnight with the threat to the ECB’s asset purchase programme and euro breakup fears looming negatively in the background. The EUR is set to follow the market mood ahead of Powell’s webinar today.
British pound highlights:
The GBP is picking up to start the day as it flirts with the 1.23 handle with markets correcting yesterday’s 0.6% decline which put it at the bottom of the G10. There are no obvious reasons for the pound’s climb this morning aside from renewed interested in the currency below the 1.23 mark. Trade uncertainty will likely heighten following the conclusion of this week’s EU-UK trade talks. There seems to be a 10% -15% probability that the Bank looks to negative rates.
Asia Pacific highlights:
The Chinese yuan strengthened overnight even as the city of Wuhan, where the pandemic began, reported its first new cases in several weeks.