Dollar slightly stronger as equity markets fluctuate on Covid-laced risk sentiment and election angst
FX markets favor the dollar while awaiting comments from Fed Chair Powell and Secretary Mnuchin later this morning. Risk sentiment favors safe haven currencies as equities seem on the edge of further weakness. The British pound recovered overnight from a two-month low and the Chinese renminbi is weaker after authorities in China halt their currency’s gains.
“In the fields of observation chance favors only the prepared mind”
September 22, 2020
EUR/USD 1.1754 GBP/USD 1.2791 USD/CAD 1.3297 AUD/USD 0.7223 USD/JPY 104.63 USD/CNH 6.7731 USD/ILS 3.4328 USD/MXN 21.3355 USD/CHF 0.9152 USD/INR 73.585
The dollar is steady awaiting speeches and economic data later this morning. Jerome Powell will warn of an uncertain economic recovery and employment remaining below pre-pandemic levels when he speaks before the House Financial Services Panel along with Treasury Secretary Steven Mnuchin. The Fed Chair will also push for more fiscal support from the government, according to reports. Existing home sales and Richmond Fed’s manufacturing index both feature on the release radar today.GBP
The pound dropped below the 1.2750 resistance level before recovering over 1.28. GBP got help from Bank of England Governor, Andrew Baily, who said the groundwork for possible negative interest rates would take time. Last orders! The government introduced a 10pm curfew for bars and restaurants in an effort to put the brakes on a recent surge in coronavirus infections. The prime minister will address the nation this evening and has asked those who can to work from home.EUR
The euro rally has officially stalled below the 1.18 level. Markets are hesitant in front of increases in Covid cases and the potential acrimony around the US election. The US dollar will most likely increase should safe havens become desirable. On Brexit watch, France said the EU should continue to pursue a free-trade agreement with the UK, however warned that any violation from the UK would end the push.CAD
The Canadian dollar is stable as the oil price holds at around $40/bbl. There is little economic data from Canada this week. The loonie is likely to trade in sympathy with other currencies around the general direction of the US dollar.ASIA/PACIFIC
The red-hot Chinese renminbi weakened some after Chinese authorities set the daily rate fixing at a weaker level than most market practitioners expected. Still, the renminbi is up 4.1% vs. a basket of currencies.
The Japanese yen is stronger today after suffering from late-day profit taking yesterday. The yen will likely continue to gain should the equity sell-off resume.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory
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