Monex: Amerikaanse dollar krijgt boost van olieprijsdalingen

April 22, 2020

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

USD

The US dollar spent another day in the green against the whole G10 currency board as risk-off sentiment drove currency markets. Yesterday’s collapse in oil markets was the source for the dollar rally. While oil benchmarks sit in positive territory now, unlike WTI quotations for the last 2 days due to a quirk in the futures contracts, the fall in prices was more broad-based than that seen on Monday. WTI prices fell across the futures curve yesterday, rather than being isolated to May delivery like Monday’s crash, while Brent also felt the pain as it dropped 26.6% to below $20 a barrel - its worst close since June 1999. The risk sentiment propped up the dollar, but another wave of USD demand potentially came from the oil market as investors would also be required to pay margin on speculative trades in USD. However, the size of this demand source is hard to quantify. Today, WTI seems to have stabilised in early trading at $11.60 for June delivery, while Brent remains on the backfoot having dropped nearly 12% in Asia to sit just above $17 a barrel. US fiscal policy remains in scope after US officials work on getting access for oil and gas companies to the $2trn lending programs, while also looking to rapidly expand storage capacity - the main concern in an oversupplied market which sent prices negative for May delivery. Rumblings about reducing output from the Texas Railroad Commissioner and Iraq’s Oil minister have also helped WTI this morning. Last night, the Senate passed a $484bn deal that would restore funds for an exhausted small business aid program. The House is set to vote on the measure tomorrow with Donald Trump promising to sign it. The deal includes $320bn for the PPP meant to help small businesses keep workers employed, but the deal is supposedly the last tranche under the current plan according to Treasury Secretary Mnuchin. The deal comes as new infections in the US rose by the most in almost three weeks, while the data suggest improvements in major metropolitan areas. Today’s data calendar is light, with the NY Fed’s Vice President Singh set to speak at 15:00 BST on actions related to COVID-19.

EUR

The euro was ranked as one of the worst performing currencies against the dollar yesterday with the collapse in WTI and the steep fall in Brent prices weighing on market sentiment and calling for new safe haven demand. Eurozone COVID-19 figures seemed to be improving, but Germany’s new infections rose to a three-day high while the death toll rose sharply as well. This comes shortly after the government began to open up the economy. Yesterday, the German ZEW Expectations survey soared to 28.2 in April from -49.5 in March, reaching a five year high. The assessment of the current situation printed -91.5, far below the forecasted -77.5 and the prior reading of 43.1. The divergence between the current situation and expectations has not been this large since the global financial crisis. With lockdown measures in full effect through April and countries throughout the eurozone planning on gradually reopening the economy in the coming months, there are reasons to hope things won’t get much worse for the region. European Central Bank policymakers will hold a conference call this evening to discuss the easing of rating rules, possibly with the intent to take the edge off of concerns that some bonds may be downgraded following the large costs of the economic downturn caused by COVID-19.

CAD

The loonie fell 0.44% against the dollar yesterday, marking a 1.4% depreciation in the first two days of the week, as global market sentiment and another slump in oil prices weighed on the petro-currency. However, the loonie’s defence against the slide in oil was substantially better than other petro-currencies such as NOK, which fell over 3% in the same time period. Today, as WTI prices stabilise, the loonie is joining the risk rally in the G10 space and has reversed all of yesterday’s losses in one fell swoop, but problems sit on the horizon for the currency as the energy is likely to crash with prices sitting at such a low level. The energy sector currently accounts for around 10% of GDP and the current fiscal and monetary stimulus measures are unlikely to buffer growth from this loss of economic activity in the medium-term as the economy recovers from the coronavirus impact. The deterioration of the terms of trade is likely to keep the loonie capped from any serious bouts of strength.

GBP

Sterling, as a newly founded high beta currency post-Brexit, felt the force of yesterday’s souring global risk sentiment and dropped over a percentage point against both USD and EUR. The pound plunged to a two-week low yesterday as the EU and UK conduct a week of negotiations over the future trading relationship following a 6-week interruption caused by the virus. Thus far, the pound’s 7.3% year-to-date drop against the dollar marks its worst start to the year since 1991. Options markets are pricing an increased chance of further sterling weakness in the months to come. GBPUSD 3-month risk reversals, which encompass the June deadline for the UK government to seek an extension to the Brexit deadline, are currently sitting at levels not seen since March 2019 when the risks of a stark exit were rife during Theresa May’s last hurrah. Today, with improved risk sentiment in markets, the pound sits 0.3% higher, at the time of writing, but continues to trade at the mercy of overall market movements. This morning’s CPI data saw inflation fall from 1.7% to 1.5% in March, which is unsurprising given the sudden drop-off in consumer demand at the back-end of the month, but this data point unlikely captures the full coronavirus impact on prices as businesses tend to take a few months to adjust the cost to the consumer. The release had a limited market impact seeing as the Bank of England already emptied their toolkit to prop up the UK economy and inflation expectations back in March.