Risk-on mood continues, equities higher, dollar lower

The risk-on mood in the markets continued overnight, despite Phase 4 stimulus talks in Congress at a stalemate and legal challenges against President Trump’s proposed tax cut on capital gains announced yesterday. Asian equity markets were mixed, but European markets were in the green and US equities are opening higher. The dollar index is lower, Scandinavian currencies (NOK and SEK) outperformed and the Brazilian real and New Zealand dollar underperformed. US CPI released this morning of 0.6% for July was double the expected 0.3%. Bond yields moved higher on the news. Oil is firm and gold rallied after dropping briefly below $1,900.

“Everyone thinks of changing the world, but no one thinks of changing himself.” 

Leo Tolstoy
  • FX Rates
    August 12, 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

    The dollar index changed little overnight, but individual currencies performances against the dollar have changed. Gainers include NOK, SEK and CHF and losers BRL, JPY and NZD. Higher-than-expected CPI for July had little impact on markets this morning. US Treasuries were the exception, as 10YR yields reached 0.70%. Phase 4 stimulus talks at a stalemate in Congress, legal challenges to Trump’s proposed tax cut on capital gains, and Biden’s announcement of Kamala Harris as his running mate also had little impact on markets.

    GBP

    The pound declined, then gained, after an after better-than-expected UK GDP data. Although Q2 GDP declined by its worst-ever 20.4% QoQ, more recent June GDP MoM reached 8.7%, better than the 8.0% expected. Also, GDP for May was revised higher, from 1.8% to 2.4%.  The pound continues to trade over $1.30 for August, but only barely.

    EUR

    The euro edged higher on a lack of market-moving events or data releases. Eurozone Industrial Production for June (MoM) of 9.1% was lower than expected and last month’s. Europe’s corporate bond spreads tightened to their narrowest since early March, and are near pre-virus levels.

    CAD

    The Canadian dollar gained after earlier losses, as oil prices rose and risk-on trading continued. Canada reported strong housing starts yesterday, but large currency speculators remain net short CAD.

    ASIA/PACIFIC

    The USD/CNY currency pair dropped slightly overnight. Traders await a slew of important China economic data for July tomorrow: New Home Sales, Industrial Production, Retail Sales and  Property Investment figures.

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Scott Petruska, CFA
WRITTEN BY
Scott Petruska, CFA

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