FX Update

US dollar is mixed, markets await central bank meetings

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The US dollar is mixed overnight, equity markets drifted lower and bond yields edged higher. Traders await upcoming central bank meetings: the European Central Bank Thursday, and the Fed, Bank of Japan, Bank of England and Swiss National Bank next week.

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  • FX Rates
    September 10, 2019

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  • USD

    The dollar showed a mixed performance overnight. The Chinese yuan made the biggest gain (+ 0.25%) versus the dollar, the Australian dollar the worst (-0.10%). US 10-year Treasury yields moved up to 1.65%, and US equity futures point to a slightly lower open.


    The UK pound edged off earlier lows after PM Boris Johnson promised to work for an actual Brexit deal with the EU. Yesterday, he had suffered another defeat in Parliament in his attempt to get approval for an early election. Separately, BOE’s Mark Carney stated that he may not be able to cut interest rates as he did in the previous economic downturn.


    The euro moved slightly lower as traders don’t think the upcoming ECB meeting will be very positive for the euro. On Thursday, ECB President Draghi will lay out his package of monetary stimulus - traders expect it to be a combination of rates cuts and a bond-buying program. Some analysts suggest the package may not be as aggressive as many originally thought, as critical voices within the ECB argue that a large stimulus package is not necessary given the current state of the eurozone economy.


    The Canadian dollar rallied from session lows following the release of Canada’s Building Permits which rose 3.0% in July. Oil prices edged higher overnight ahead of an OPEC and Russia meeting on Thursday to discuss production cuts. The new Saudi Arabia oil minister, appointed over the weekend, has already expressed support for continuing cuts.


    The USD/CNY dropped to 7.10, its lowest level since late August. China continues to open up its financial markets to foreigners. The State Administration of Foreign Exchange (SAFE) said that global investors will no longer be capped on purchases of Chinese stocks and bonds. The SAFE’s goals are to increase the use of the yuan in international transactions and to increase the amount of foreign capital coming into the Chinese markets to improve China’s persistent current-account deficit.
    The USD/JPY moved higher overnight in reaction to the slight risk-off sentiment in the marketplace. Higher USD bond yields also increased demand for dollars versus the yen.

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Scott Petruska, CFA
Scott Petruska, CFA

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