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Week Ahead: Coronavirus and FOMC in Focus

In a ceremonial event, Joe Biden was sworn in as President of the United States on Wednesday, and the day went off without a glitch.  Immediately, he must deal with the problem that his processor couldn’t get a grip on – controlling the coronavirus and getting the vaccines distributed. ...

Dollar Shrugs At Biden Stimulus Plan

Currency markets are unmoved by Biden wish-list Currency markets entered a holding pattern overnight, ahead of the Biden stimulus release, and have remained to circling in Asia this morning. Part of the reason is that the fiscal package contents were well telegraphed beforehand and contained no reactionary surprises. The stimulus...

The Dollar’s Rise Resumes

Dovish Fed Governors cap dollar's gains A plethora of Federal Reserve Governors, notably Harker, Brainard and Clarida, along with some successful bond auctions, managed to cap the rise in US yields overnight, with the 10-year now over ten basis points of its recent highs. Harker said that the Fed would...

US Dollar Losses Continue

US dollar sell-off resumes overnight The US dollar extended its losses for the week, the dollar index falling by 0.26% through support at 90.50. Assuming it navigates the FOMC without incident, the dollar index remains poised for further losses, with an initial target of 90.00. Having said that, the index...

The Dollar Stays Vulnerable To The Downside

Markets Europe took a cautiously optimistic start to the week. Sentiment was boosted by comments from EU chief negotiator Barnier who said that a Brexit trade deal could be reached this week if a compromise on fisheries is found. European stocks eked out modest gains ranging from 0.5% to 1%....

China’s Economic Recovery and Less Policy Accommodation Lend Support to Renminbi

The latest set of economic data in China reflects that recovery continued in October. Growth was seen in both the supply and demand sides. However, while supply side continued to expand more than anticipated, the consumer spending did not perform as strong as market expectations. PBOC has recently mentioned...

US Dollar Steady ahead of US Holiday

US dollar down slightly in Asia Overnight the US dollar consolidated on forex markets, with the dollar index almost unchanged at 92.75. Amongst the major currencies, the Japanese yen retraced some of its losses, USD/JPY easing to 105.35 overnight, and dropping further to 105.10 this morning. The sterling continues to...

US Dollar Falls On Election Uncertainty

US dollar retreats as regular service resumes The US dollar index finished just 0.12% lower at 93.44 yesterday, but that belied the volatile nature of election day trading. The G-10 currencies traded on large ranges across the session, but what was evident was that the global reflation trade had no...

Investors Give US Dollar A Thumbs-Up

Haven buying propels the US dollar higher The greenback enjoyed a robust overnight session as investors rotated out of G-10 currencies and into dollar and yen haven positioning. The dollar index rose through its 50-day moving average (DMA), finishing 0.50% higher at 93.50. It may well test monthly resistance at...

Dollar Rebounds As Stimulus Talks Fizzle

The US dollar recoups losses The US dollar recouped all of its previous day’s losses overnight, as the stimulus trade ran out of momentum and US Treasury yields continued to firm. The US dollar index rose 0.35%, rallying back through 93.00, with US dollar strength continuing this morning. Amongst the major...

US Dollar Dips Despite Political Risk

US dollar declines despite stimulus and election uncertainty The US dollar bucked the risk-off tone sweeping financial markets overnight, with the dollar index plunging 0.50% to 92.60, carving through major supports at 93.00 and 92.75. Much of the fall, though, can be attributed to the strong performances of the sterling...

Dollar Index Dips On Stimulus Optimism

Dollar falls against euro and yuan The US dollar index fell to a one-month low overnight, retreating 0.40% to 93.05. Most of the fall can be attributed to a strong performance by the euro, which rose 0.45% to 1.1815 overnight, presumably as a pro-cyclical beneficiary of the continuing US stimulus...

China Data Weighs On The US Dollar

Currency markets continued to trade sideways on Friday, with the US dollar edging lower as markets continued to price in a US stimulus trade. Another impressive set of economic data from China this morning has lifted G-10 and regional Asian currencies modestly, as the recovery narrative takes precedence over...

China’s GDP Growth Missed Consensus. Strong Activity Data Support Renminbi’s Outlook

The latest set of China's macroeconomic data is mixed in the headline. GDP growth in the third quarter came in below market expectation. However, major indicators such as industrial production, retail sales and fixed asset investment all beat consensus, confirming recovery is underway. Against this backdrop, we expect PBOC...

Currency Markets In Doldrums

Currency markets range trade overnight With the exceptions of the British pound, which continues to defy gravity on hopes of a Brexit agreement, currency markets contented themselves with directionless range trading. The US dollar index eased 0.14% to 93.40 in a non-descript session. The story is much the same with regional...

PBOC Moves to Curb Renminbi’s Strength

PBOC announced over the weekend to lower the FX risk reserve ratio for forward foreign exchange sales from 20% to 0, effective October 12. The move is likely a response to the strength in renminbi (a.k.a. RMB, CNY). The central bank pledged to “maintain the flexibility of the RMB...

Week Ahead: October Will be Anything but Normal

This week is going to be full of headlines regarding President Trump’s health and Brexit. As if things couldn’t get more bizarre in 2020, US President Trump and his wife have tested positive for the coronavirus, only weeks ahead of the November 3rd US election.  Traders will be monitoring the...

PMIs Suggest China’s Recovery Remained Intact in September. Yield Differential to Support CNY

The latest economic indicators show that China’s economy continued to recovery in September. NBS’ official manufacturing PMI climbed +0.5 point higher to 51.5 in September, beating consensus of 51.3. The non-manufacturing PMI also increased to 55.9 from 55.2 in August. The composite index gained +0.6 point to 55.1 last...

US Dollar Retreats On Equity Rally

Equity surge sends US dollar lower Dollar shorts gained some relief overnight, after the rally in equity markets mechanically flowed through to a weaker US dollar. The dollar index retreated 0.33% to 94.27 but remains comfortably above support at 94.00. In the G-10 space, the procyclical EUR, AUD and NZD...

The US Dollar Rallies On Haven Flows

US dollar posts broad gains The US dollar staged an impressive rally overnight, notably versus the major currency grouping, as investors took fright at a number of negative factors sweeping markets. The dollar index rose 0.60% to 93.55, with a test of resistance at 94.00 seemingly on the cards. The...

Pound, Yuan Firm Up Against US Dollar

The US dollar weakens modestly as equities strengthen The overnight session on currency markets was a quiet one, with the rise in US equities flowing through to a modestly weaker US dollar. The dollar index fell 0.23% to 93.05, leaving it near the middle of its two-month range. The pro-cyclical...

China data beat expectations, USD/CNH breaks key fibonacci support

August economic data released from China today were generally better than expected. Industrial production continued its bounce and rose 5.6% yoy versus expectation of 5.1% yoy. That's also the fastest rise in eight months. Retail sales rose 0.5% yoy versus expectation of 0.0% yoy. Sales were finally growth after...

US Dollar Holds Steady On Currency Markets

US dollar retains gains after strong US job numbers Currency markets had a relatively directionless session on Friday, with the US dollar holding onto its corrective gains after US yields spiked after the US employment data. The dollar index rose just 0.20% to 92.97, while the lack of negative fallout...

The US Dollar Continues To Weaken

US dollar remains under pressure The greenback continued on its downward path overnight and has weakened further in Asia. The dollar index has fallen by 0.30% to 91.80 today, after the PBOC’s firm CNY fixing. The dollar index is now below its 92.00 support region and targets further losses to...

Dollar Recovery Ends Quickly

Dollar under pressure after brief respite US yields are quickly reversing lower after spiking higher after Mr Powell’s address on Thursday. The reality that inflation is but a distant hope, and that interest rates in the US are going nowhere in a hurry, saw the rotation out of US dollars...

Risk Sentiment Remains Relatively Upbeat – Fed Chair Powell’s Speech Eyed

Markets Positive developments in treatments for Covid-19 disease proved once again a catalyst for broad market optimism yesterday in an otherwise uneventful session. EMU stocks wiped out Friday's PMI driven losses and soared more than 2%. WS eked out gains up to 1.35%. Oil prices continue to touch key resistance...

Lack Of Economic News Is Good Enough Reason To Continue The Established Trends Of Ever-Higher Stocks

Markets Last Friday's European PMIs reminded markets the coronavirus is still very much present. Dire readings in especially the services sector after the reintroduction of some lockdown measures prompted a selling wave in EMU stocks. Sentiment turned for the better by the time the US joined dealings. Better-than-expected PMIs as...

PBOC’s Restraint Monetary Policy will Continue to Support CNY vs USD. US-China Tensions as Major Downside Risk

Renminbi (a.k.a. RMB, CNY) has strengthened against US dollar over the past 3 weeks. While the broad-based USD weakness is the key reason, PBOC's neutral policy action over the past months has also led to renminbi's appreciation. We expect the phenomenon would persist, supporting renminbi, in coming months. PBOC announced...

Equities Mixed In Early Asia

Quiet start for Asian markets Wall Street cruised into the end of the week with the S&P 500, Nasdaq and Dow Jones finishing almost unchanged on Friday. Without any direction from New York, and after a quiet weekend, Asia has been left to its own devices, leading to a mixed...

China retail sales unexpectedly contracted in July, USD/CNH channeling lower

The batch of economic data released from China is mixed. In particular, retail sales contracted -1.1% yoy in July, versus expectation of 0.3% yoy. That showed vulnerability in domestic demand. Nevertheless, industrial production rose 4.8% yoy in July, slightly above expectation of 4.7% yoy. Fixed asset investment dropped -1.6%...