All is Quiet on the Currency Market Front (Roll Tumbleweeds)

. 3 min read

Overview:

  • The Dollar Index is consolidating around 2019 highs, as the euro and pound fall apart.
  • USD/CAD loses steam and returns inside a 1.34-1.35 range.
  • NYMEX WTI crude steadies just below $60.00, after dropping to a 2-month low.

Highlight:

The Euro is trading dangerously close the key psychological 1.11 level. The shared currency has lost nearly 1.5% of its spot value this month, plagued by softer than expected economic data, ongoing uncertainty over Brexit and global trade tensions. We expect the shared currency to remain under pressure as the US and EU prepare to discuss future trade relations.

US DOLLAR

The US Dollar Index showed little reaction following the release of the second estimate of GDP for Q1.  Real Gross Domestic Product rose at an annual rate of 3.1%, lower than the advance estimate (3.2%). Investments were revised lower, but exports and the personal consumption expenditure components saw upward revisions.

In a separate report, unemployment claims came in line with market consensus. The currency market remains wary of an escalating war of words between the US and China. We expect attention to switch to the release of PMI readings out of China later today for further trading actions.

BRITISH POUND

GBP/USD is keeping its head above the key 1.26 mark, and investors are looking for clear direction. The leadership contest for the new UK PM is expanding, with more candidates joining the ring.  The EU has signalled yet again that the Withdrawal Plan is not open for negotiation and sentiment is now growing towards a no-deal exit. The pound will continue to be driven by events around the Brexit and patience at current levels will be heavily tested over the coming sessions.

EURO

EUR/USD is consolidating at low levels in a thin market. Germany and France are closed today and there was little on the data front to provide any trading impetus. The euro has fallen by nearly 1.5% this month amidst political uncertainty, dismal growth indicators and global trade tensions.

CANADIAN DOLLAR

USD/CAD makes a quick reversal from yesterday’s four-month high. The loonie skidded, on initial reaction, after the Bank of Canada kept its rates on hold at 1.75%. Oil futures have stabilised after touching an 11-month low. The pair will be oscillating around the 1.35 handle and will have an eye on the speech from Deputy Governor Wilkins. She is due to speak on recent economic developments and their impact on monetary policy.

AUSTRALIAN DOLLAR

The Aussie is sinking lower and seems likely to dip under 0.69 as US-China trade tensions continue to ratchet up. Westpac analyst Sean Callow said that increases in iron ore prices and predictions of July tax cuts are giving currency investors hope for a rally on the AUD.  

FEATURED CURRENCY

Dollar-yen moves above the mid-point of 109, supported by a bit of a rebound in the US Treasury bond yields. The release of the second estimate of US GDP did little to move the needle. Investors are expected to keep a cautious tone ahead of a slew of data released out of Japan this evening. The unemployment rate, retail sales and inflation numbers will provide the latest updates on the state of the economy.

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