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FX Update

FX markets assuming Fed rate cut now turn to US-China trade talks and Brexit for direction


After Fed Chair Powell implied a rate cut at July month-end, the US dollar has been steadily weakening. The Fed largely ignored the better than expected US jobs data for June and will remain on a rate-cut course absent any extraneous shock. 

“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”
Mark Twain
  • FX Rates
    July 12, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    The US dollar is softer continuing this week’s trend mostly stemming from global FX traders digesting recent cautious comments from Fed Chair Powell. Powell stated at his congressional testimony that the uncertainties in the US economy “have increased in recent months” – thereby leading the markets to anticipate a rate cut at the July 31 FOMC meeting. A release this morning of higher than expected PPI data for June is not likely to sway the Fed enough to avoid the strongly telegraphed rate cut.


    The pound continued gains vs. the US dollar for a third day mostly on overall dollar weakness. Weaker UK economic data this past week along with no-deal Brexit scenarios gaining probability are largely priced into the current FX rate. 


    The euro weakened overnight despite Eurozone Industrial Production for June beating estimates. ECB’s last governing council meeting confirmed investors’ expectations around monetary policy - the minutes showed policymakers agreed that the ECB should be “ready and prepared” to restart monetary stimulus measures.


    The Canadian dollar continues to trade at its strongest levels of 2019 vs. the US dollar. Traders see the interest rate differentials (US 2.50% and CAD 1.75%) closing while oil prices stabilize. 


    The Chinese renminbi weakened overnight as traders position in front of Sunday’s Q2 GDP release where a reading of 6.2% is expected.  China trade data for June showed a drop in imports thereby raising the trade surplus.

    The Australian dollar strengthened against the greenback continuing a trend of higher commodity prices supporting commodity exporting countries.

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About the Author

Peter Compton is a senior foreign exchange advisor for Silicon Valley Bank’s global financial services group, and has been with SVB since 2007. He helps clients design and implement hedging strategies for foreign currency exposures. Compton has over 20 years experience in global financial markets.

Before joining Silicon Valley Bank, Compton spent seven years working in the European equity markets. Based in Germany, he spent four years with HSBC and three years as Head of Equity Sales for ABN-AMRO in Frankfurt. Prior to his work overseas, Compton spent seven years with Bank of America in San Francisco as an equity and fixed income derivative specialist.

Compton holds a bachelor's degree in business and management from the University of Rhode Island and a Master's of Business Administration from San Francisco State University.
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