1. Reports
  2. Daily FX Report
Non-independent Research

Daily FX Report

Read risk warning

EUR / USD

The US goods trade deficit declined to $70.6bn for June from $75.3bn previously as exports recovered at a stronger pace than imports. Pending home sales increased 16.6% for June, above expectations of 15.0%. Overall, the dollar lost ground after US markets opened, although moves were driven primarily by gains in the Euro as commodity currencies were unable to make significant headway. The single currency gained fresh support and strengthened to near 1.1780 at the European close.

The Fed maintained the Fed Funds rate in the 0.00-0.25% range, in line with consensus forecasts and with a unanimous vote. According to the statement, economic activity and employment had picked up somewhat in recent months, but remained well below levels at the beginning of the year.  The public health crisis will weigh heavily on economic activity employment and inflation in the short term and also poses a considerable threat to the medium-term outlook.

The central, therefore, remains committed to using its full range of tools to support the economy and meeting its goals. It expects to maintain the Fed Funds rate at current levels until it is confident the economy has weathered recent events. There was no mention of yield-curve control in the statement.

Chair Powell stated that the evidence suggested that the pace of economic recovery had slowed since June and the pandemic is a disinflationary shock. He added that there is clearly a risk of a slowdown in the rate of growth and the labour market has a long way to go to recover. He reiterated that the bank is not thinking of raising interest rates. The dollar gained briefly, but overall remained on the defensive with the Euro testing the 1.1800 area. There was selling interest in this area with the Euro edging lower to 1.1760 on Thursday as the dollar corrected slightly from 2-year lows, although overall US sentiment remained negative. 

JPY

The dollar remained under pressure ahead of the New York open and dipped to fresh 4-month lows near 104.80 before stabilising. There was support at lower levels with the US currency consolidating around 105.00, especially with reservations over the potential for verbal intervention from the Japanese Finance Ministry.

The Federal Reserve announced that swap lines with central banks would be kept open until March 31st next year, maintaining strong liquidity provisions for overseas central banks. Bond purchases will be maintained at least at the current pace and heavy overnight repo operations will continue.

Coronavirus concerns continued with California, Texas and Florida reporting 1-day records for fatalities, although the number of new cases slowed slightly.

US equities held gains and, although the dollar briefly spiked higher, it settled around 105.00 as the lack of yield support undermined fundamental backing.

There was further uncertainty over US fiscal policy with Republican Senate leader McConnell stating that he hopes to reach a deal on unemployment benefits by Friday, but there were still internal party divisions. There were further concerns over coronavirus developments in Tokyo, but retail sales data beat expectations with a 1.2% decline in the year to June after a 12.5% decline the previous month. The dollar found some support below 105.00 and secured a limited recovery to 105.20.

GBP

UK mortgage approvals increased sharply to 40,000 for June from 9,300 the previous month and above consensus forecasts of 34,000 as the economy bounced back after the easing of lockdown measures in the housing sector. There was a further repayment of consumer debt during the month, although there was a substantial decline from May’s level sand overall consumer lending posted a £1.8bn increase on the month following May’s £4.5bn contraction.

The data provided an element of currency support, although moves were dominated by global flows and further evidence of month-end positioning. Sterling advanced to fresh 4-month highs just below 1.3000 against the dollar while the Euro dipped to 1-week lows below 0.9050 before a recovery to 0.9075 as the Euro gained fresh support. The UK probed resistance above 1.3000 following the Fed statement before hitting selling interest. There will be further month-end positioning over the next two days which could lead to choppy trading. Sterling retreated to near 1.2960 on Thursday as the dollar recovered slightly with the Euro around 0.9070.

CHF

The Swiss ZEW economic conditions index dipped to 42.4 from 48.7 the previous month. The Euro was able to make limited headway against the Swiss franc during the day while the dollar came under renewed pressure and dipped below the 0.9150 level.

The Swiss currency was unable to gain further support from gains in precious metals with the dollar dipping to fresh 5-year lows at 0.9120. The franc held firm on Thursday with extremely accommodative policies across the G3 area and very low yields continuing to provide underlying Swiss support.

Contents

Risk warning

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

Sign-up to get the latest Non-independent research

We will email you each time a new report has been published.

You might also be interested in...

Daily Report Base Metals

Daily market commentary on LME aluminium, copper, lead, nickel, tin and zinc.

Daily Report Softs Technical Charts

Technical analysis and charts for the key sugar, cocoa and coffee contracts.

Weekly Report FX Options

Commentary and analysis covering OTC currency option pricing, volatility and positioning.

Quarterly Metals Report – Q3 2020

Our analysts provide fundamental and technical analysis and forecasts for base and precious metals, iron ore and steel. We assess how COVID-19 has impacted the metals market and outline what data points to look at to help navigate the next few months in the market.