Geo-political safe-haven dollar buying replaces economic optimism

The dollar regained a portion of yesterday’s losses after optimism around the global economy reopening gave way to renewed concerns over a US/China cold war. Early euro gains from news of a possible large stimulus package gave way to geo-political concerns as the world's two largest economies seem headed again into a trade war. The loonie gained as the outlook for firmer oil prices remained due to small increases in global demand.
"You have to pick the places you don't walk away from."
Joan Didion
  • FX Rates
    May 27, 2020

    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 dollar is flat to start the trading day. After the initial 8% surge in the US dollar since the Covid crisis started the greenback has given back 5% of those gains. Some FX speculators see the renewed US/China tension soon replacing Covid as the largest creator of FX volatility.

    The Federal Reserve’s Beige Book will be released later this afternoon.

    GBP

    The pound slipped as concerns over next week's restart of UK/EU trade negotiations sapped the recent pound rally.

    EUR

    The euro gained versus the US dollar on news of a possible EUR 750B stimulus package. The new spending became possible after Germany and France signaled over the weekend a willingness to increase spending to support the broader European economy.

    CAD

    The Canadian dollar strengthened to its strongest level in two months as the price of oil held steady. Russia signaled a possible end to the supply cuts instituted at the start of the Covid crisis as oil demand begins to recover.

    ASIA/PACIFIC

    The off-shore Chinese renminbi weakened to 7.18 as the financial markets expect the Chinese authorities to manage the on-shore CNY to weaker levels.  China is butting heads with the US on multiple fronts including the recent crackdown on pro-democracy protesters in Hong Kong.

    The Japanese yen weakened slightly as the government prepares a second stimulus package to counter the negative impact of Covid. The massive economic package could total 20% of Japan’s annual GDP.

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Peter Compton
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Peter Compton

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