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Daily
FX Update

An easing of multiple geopolitical tensions leads to a softer dollar

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The dollar index softened from Friday’s close due to an easing of multiple key geopolitical tensions. Positive news with UK’s Brexit, Italy’s new government, Hong Kong demonstrations, and US-China trade negotiations led to an increase in risk appetite in the marketplace. In this environment, demand is lower for safe-haven assets, weakening the dollar, Japanese yen, gold and bonds. Equity futures indicate a higher open this morning.

Economic data this week:
Monday: US Consumer Credit (July)
Tuesday: US Small Business Optimism Index (August), US Job Openings and Labor Turnover Survey (JOLTS) (July)
Wednesday: US Producer Price Index (August)
Thursday: European Central Bank announces monetary-policy decision, US monthly budget statement from Treasury Department (August)
Friday: US Retail Sales (August), University of Michigan Consumer Sentiment Index (Sept)

  • FX Rates
    September 9, 2019

    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 reaching nearly a three-year high last week, the dollar index started the weak soft due to an easing of multiple geopolitical tensions. Traders await the ECB meeting on Thursday and a slew of US economic data releases, which may influence the Fed’s decision later in the month. Traders remain positioned long dollars.

    GBP

    The UK pound rallied following release of GDP growth, which showed their economy expanded by 0.3%, higher than expectations of 0.1%. Also, traders were encouraged when PM Boris Johnson said he would prefer a deal to no-deal by October 31, saying that a no-deal would be a “failure of statecraft.”

    EUR

    Early last week, the euro dropped below $1.10, a 2 ½ year low. It bounced hard later in the week, and now sits somewhat comfortably above $1.10. Traders await Thursday’s key European Central Bank meeting. The ECB’s current benchmark rate is negative 40 bps, and a 10-20 basis point cut is expected. However, it will be the ECB’s additional methods of easing that matter most.

    CAD

    The CAD edged higher versus the dollar as today’s risk-on sentiment supports all foreign currencies. The USD/CAD dropped close to 1.3150, its lowest level since July. Oil prices moved higher after the new Saudi Oil Minister said production cuts should continue. The closely-watched differential between US and CA interest rates reached its lowest level in nearly two years, reducing the attractiveness of US interest rates and the US dollar.

    ASIA/PACIFIC

    The Chinese yuan moved very little over the weekend. The Japanese yen’s role as a safe-haven currency led to its weakness overnight in the market’s current risk-on mood, the USD/JPY is trading near 107.

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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