Risk assets are rising as the US and China offered positive signals over trade
The US and China reaffirmed their commitment to the phase-one trade deal leading to optimism on global trade. FX markets reacted by selling the US dollar, the Japanese yen and Swiss franc while equity markets gained. China’s imports of US crude hit a record last month, customs data showed. Economic data in Europe helped the euro and investors ignored Brexit and virus-related headwinds to lift the pound.
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August 25, 2020
EUR/USD 1.1823 GBP/USD 1.3146 USD/CAD 1.3187 AUD/USD 0.7186 USD/JPY 106.35 USD/CNH 6.9123 USD/ILS 3.4001 USD/MXN 21.8891 USD/CHF 0.9097 USD/INR 74.3213
The dollar sold-off relative to most currencies after the US-China trade dispute saw signs of progress. US trade representative, Robert Lighthizer, and Treasury Secretary, Steven Mnuchin, spoke with their Chinese counterparts. Both sides are reported to have recognized the increase in Beijing’s purchases of US products and agreed to push forward with the next phase of the trade deal.
Conference Board Consumer Confidence and New Home Sales data released later this morning.GBP
The British pound gained vs. the US dollar as pessimism regarding Covid and the UK/EU trade negotiations faded, and investors looked to a surge in spending once a vaccine is available.EUR
The euro gained as German GDP data for Q2 came in at -9.7% QoQ which was better than the -10.1% expected. The August IFO business sentiment index also showed improvement over prior month.CAD
The Canadian dollar is stronger today as the price of WTI heads toward $43/bbl which is the top of the recent trading range. Positive trade sentiment also helped the loonie. FX traders will be watching a speech later today by Bank of Canada Deputy Governor Lawrence Schembri.ASIA/PACIFIC
Asian currencies gained vs. the dollar after the US and China agreed on trade despite ongoing tension regarding human rights and spying. The Japanese yen is weaker due to less demand for safe-haven currencies.
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