Monex: Verkoopdruk USD zet EUR/USD licht hoger

Monex: Verkoopdruk USD zet EUR/USD licht hoger

Currency US-dollar EUR
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Hieronder volgt een commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de koersbewegingen van de euro, het Britse pond en de Amerikaanse dollar.

EUR

The euro climbed to fresh highs against the dollar yesterday as the greenback saw some selling pressure as markets began to price in a higher chance of a rate cut than last week. Yesterday’s IFO business climate index in Germany rose from 95.9 to 96.1 month-on-month, above the consensus of analyst expectations of 95.3 supplied to Bloomberg. Though the IFO reading does not provide much evidence of the coronavirus harming German business confidence, equity markets were utterly wrecked yesterday, with European shares suffering their largest losses since 2016. This morning, however, European equity futures are showing signs of recovery and edged higher as safe havens flows retreated somewhat. Real GDP in Germany changed little in the final quarter of 2019, with domestic demand and ex-inventories taking a hit and slowing growth to 0.2% QoQ. Looking ahead, this does not bode well for Q1 GDP given the current reading does not reflect the hit taken from the coronavirus outbreak.

USD

US equity markets were slammed in yesterday’s session, with the day’s trading best described as a bloodbath. Fresh coronavirus fears sparked more risk-off selling and following the US PMI data, equity markets began to fear the worst - that the economic impacts will begin filtering into the US economy. The Dow Jones Industrial Index fell over 1000 points in its worst trading day in over two years, while the S&P 500 index also fell by a similar 3.35% on the day. The Japanese yen was the best performer against the dollar in this heightened risk climate, rallying over a percentage point, while the euro and Swiss franc also managed marginal gains. Open economy and commodity-linked currencies continued to feel the pain from the coronavirus induced pricing, with NOK and CAD sitting at the bottom of the G10 currency rankings. Yesterday’s volatility in equity markets is highlighted by the S&P 500 VIX index surging 47%, the most in two years. The term structure of the volatility index also inverted, i.e. spot levels rising above futures pricing, signalling investors are more concerned with short-term volatility than further out in time. Fears of the coronavirus lead to the White House asking Congress for $2.5bn in extra funds to fight the virus, with more than $1bn going towards creating a vaccine and distributing it accordingly. This morning the market looks much more subdued as the dollar sits marginally lower and Treasury yields climbing.

GBP

GBPUSD continues to struggle to find direction, floating in a 1.7% range since February 3rd. Yesterday, the pound suffered losses against the dollar in the heightened risk climate as Downing Street officials stated the Prime Ministers red line towards trade negotiations was “taking back control”. The headlines hinted that Johnson would ignore pleas from businesses to strike a favourable trading relationship with the EU at the cost of regulatory alignment, and instead put emphasis on regaining economic and political sovereignty. Yesterday the EU finalised its draft mandate for negotiations with the UK, which is set to be signed off at a meeting of European affairs ministers today. The UK will also finalise its respective post-Brexit trade position today, with both sides set to start formal talks next week.