Dollar remains firm as global tensions rise
Scott Petruska, CFA " | October 16, 2019
Safe-haven demand is keeping the dollar firm as global tensions dominate the news. The Hong Kong crisis, Brexit doubts, Turkey fighting in Syria and Spain/Catalan’s potential law and order problem are putting geopolitical risks on the front burner. Confused traders seem to be pulling back from the markets and trying not to over-react. Little movement is seen in the other safe-haven assets - T-Bonds, gold, Japanese yen or Swiss franc.
October 16, 2019
EUR/USD 1.1040 GBP/USD 1.2794 USD/CAD 1.3223 AUD/USD 0.6729 USD/JPY 108.66 USD/CNH 7.1070 USD/ILS 3.5351 USD/MXN 19.2427 USD/CHF 0.9964 USD/INR 71.4375
The dollar index remains firm as volatility picks up in the currency markets due to a nasty buildup of worrying global events. US T-bond yields are a few basis points lower and equities will likely open lower, despite updated earnings from Bank of America.GBP
The UK pound whipped around in Europe, ending the trading session slightly lower, as doubts grow over Brexit. Northern Ireland’s Democratic Unionist Party (DUP) has called into question UK PM Boris Johnson’s newly proposed withdrawal agreement.EUR
The euro is little changed overnight, despite anxieties related to Brexit. Eurozone inflation unexpectedly hit a three-year low of 0.8%, which has reignited concerns with the Eurozone economy and the ECB’s ability to get inflation up to its 2.00% target.CAD
The CAD was steady overnight. Oil prices were lower, but FX traders were unmoved. Canada’s CPI for September will be released later in the day. Expectations are for inflation to climb to 2.1% from 1.9% per annum in August, which some traders say may influence the Bank of Canada to pursue more of a wait-and-see attitude for future rate cuts. The Bank of Canada meets next on October 30th.ASIA/PACIFIC
The Chinese yuan moved little overnight, even after China threatened to retaliate if the US Congress passes a bill offering support to pro-democracy protesters in Hong Kong.
The USD/JPY currency pair retained yesterday’s gains, nearly touching 109 overnight. Safe-haven buying of the yen was not seen, despite heightened geopolitical risks.