Déjà Vu All Over Again as Currency Market Cautiously Enters June

. 4 min read

Overview:

  • The greenback is trading with weaker footing against most G-10 currencies as markets wait on trade deadlock
  • USD/CAD moves back to around the 1.35 post, driven by better performance in the crude oil market.
  • NYMEX WTI crude prices started firmly, up 1.25%, after what might be called a May horror show

Highlight:

USD/CAD returned to its previous trading range, declining below the 1.35 handle. The greenback seems to have lost steam after clocking a four-month high last week. Investors are cautious with the ongoing trade tensions – which will impact not only overseas businesses but domestic sectors as well. The CAD is expected to draw some temporary support for stronger pricing in the oil futures market today. However, the medium-term outlook is looking less rosy: the Canadian manufacturing sector contracted again, recording its sharpest decline in new orders in over three years.

US DOLLAR

The currency market crawls into June, plagued with fear of escalating global trade tensions. Commodity currencies are making rare gains today, riding mainly on the back of better performance in the oil futures market. WTI is up nearly 2.5% after seeing a complete of 17% last month. The general market sentiment is heavily tilted to cautious amidst lingering trade dispute between the US and China. The US Administration has extended the deadline to hike tariff from 10% to 25% on Chinese imports from June 1stto June 15th.  Markets will be closely watching the next move in US 10-year Treasury yield as it approaches psychological 2% mark.

BRITISH POUND

GBP/USD is oscillating around the 1.26 handle, after the UK Manufacturing PMI, pointed to contraction. The latest reading came at a 34-month low with both new orders and employment declining. Businesses are finding it hard to attract clients – both locally and internationally.  The Pound is expected to continue to trade with a negative sentiment as we move into the first session of the month.

EURO

The Euro is trading higher this morning, 0.30% up with the greenback trading lower across the board. The EUR/USD pair seems to largely ignore the manufacturing PMI report. The Index at 47.7, showed the sector continues to contract for the fourth consecutive month. Investment within the industry remains low. However, there is a slight hint of optimism with a slightly slower decline in new orders and output components. Any further gains are however expected to remain capped around the 1.12 handle.

CANADIAN DOLLAR

USD/CAD continues its southbound move from last Friday, trading 0.15% lower this morning. A revival in the crude oil is extending temporary relief to the Canadian loonie, pushing it below the 1.35 handle. The CAD has been under pressure due to global trade tensions, closing in negative territory for the fourth consecutive month. The market will keep an eye on the manufacturing PMI for further trading action.

AUSTRALIAN DOLLAR

The Royal Bank of Australia is expected to lower interest rates in its Tuesday session to be more in line with other G-10 nations. This rate drop, along with ongoing trade tensions between the US and China, is expected to weigh on the Australian in coming months.

FEATURED CURRENCY

The greenback is making a timid recovery after crashing to a four-month low this week. Fear of escalating trade tensions on multiple fronts and rising geopolitical risks contributed to a 3% the surge of the Japanese yen against the greenback last month. Investors conveniently ignored soft domestic Nikkei Manufacturing PMI. The indicator at 49.80 moved into contraction zone, new orders slipping further for the fifth month. USD/JPY is expected to move with overall market sentiment.

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This article originally appeared on the XE Community website.