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Dollar stronger ahead of US-China trade deal

The dollar is stronger as traders anticipate the signing on Wednesday of ‘phase one’ of the US-China trade deal. Coupled with de-escalation of US-Iran tensions, an improved risk sentiment led to rallies in the Chinese yuan and emerging market currencies. The pound declined after a Bank of England official mentioned a possible rate cut later this month. Equities are poised to open higher, and bond yields slightly lower. Trading is light as traders have plenty of economic data to digest this week.

Monday:
Bank of Canada Business Outlook Survey;
German Whole Price Index (Dec);
Eurozone Economic Forecast Survey; UK Trade Balance (Nov)
Tuesday:
US CPI (Dec)
Wednesday:
US PPI (Dec);
Eurozone Industrial Production (Nov)
Thursday:
US Weekly Jobless Claims;
US Retails Sales (Dec);
European Central Bank Policy Meeting;
Eurozone Inflation Rate (Dec)
Friday:
US Housing Starts (Dec);
US Industrial Production (Dec);
US Consumer Sentiment Index (Jan)

  • FX Rates
    January 13, 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

    After early losses in Asian trading, the dollar is slightly higher from Friday’s levels. Traders are adjusting positions ahead of the signing, scheduled for Wednesday, of ‘phase one’ of a US-China trade deal. A weaker Japanese yen and UK pound helped fuel the dollar rally. The dollar index is trading near its highs of the month.

    GBP

    The UK pound was the worst performing of the G-10 currencies following comments from a BOE official that he will vote for an interest rate cut at the January 30 meeting if there are no signs that the UK economy is improving. GBP dropped below $1.30 for the first time since December.

    EUR

    The euro moved little overnight as traders await a slew of eurozone economic data releases and an ECB Monetary Policy Meeting this week.

    CAD

    The Canadian dollar was steady ahead of today’s Bank of Canada Business Outlook Survey, which could impact the Canadian central bank’s policy decision on January 22. Despite evidence of slowing GDP growth in Canada, expectations are that the BoC will not change rates.

    ASIA/PACIFIC

    The Chinese yuan and emerging market currencies rallied, extending a six-week strengthening run. Traders are optimistic that ‘phase one’ of a US-China trade deal will be signed this week and had some comfort that Iran backed away from ramping up confrontation with the US. The USD/CNY currency pair dropped below 6.90, its lowest level since last July. On the other hand, the Japanese yen weakened towards 110.00, its worst level since May 2019.

Contact Us

For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/foreign-exchange

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About the Author

Scott Petruska is Chief Currency Strategist and senior advisor for Silicon Valley Bank’s global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies, and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.

Petruska has more than 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.

Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.

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