Monex: ‘Veilige’ dollar verzwakt door optimisme over economisch herstel
Hieronder volgt een commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.
The euro advanced against the dollar yesterday and hit its highest level since mid-March amid reopening eurozone economies and continued dollar weakness. German Chancellor Angela Merkel failed to reach an agreement on the additional €50-€100 bn stimulus package that was discussed in a nine-hour long meeting with her Christian Democratic-led bloc and the Social Democrats yesterday. Merkel will reconvene the discussions today in order to broker a deal. The European Central Bank’s release of the details around their Pandemic Emergency Purchase Programme (PEPP) programme yesterday showed that the purchases clearly leaned towards Italian bonds. The central bank bought €37.4 bn of Italian debt since the programme was first announced in late March, which is disproportionately high relative to purchases made from other Eurozone members. A similar but smaller skew can be seen in German bond purchases, although these bonds have a shorter maturity term than the Italian debt purchased. The breakdown of the emergency-bond programme sheds light on how much more flexible the 750 pandemic QE programme is compared to the regular QE programme that was recently legally questioned by the German Federal Constitutional Court. The latter is constricted by limits on how much of each country’s debt the ECB can purchase and contains a rule that required bond purchases to be allocated ad valorem across the bloc. Today’s calendar is packed with Purchasing Managers’ Index releases for Spain, Italy, France, Germany and the eurozone, and unemployment data from Italy, Germany and the eurozone, all to be released throughout the morning.
The dollar continued to drop along with Treasuries yesterday as optimism around economic recovery following the reopening of economies globally improved risk sentiment. The greenback spent yet another day in the red against the whole G10 currency board as a result, while commodity currencies like AUD and NZD reached multi-month highs, clearly adding to the narrative of improved risk sentiment. US President Donald Trump received harsh criticism from Democrats, religious leaders and some Republicans after his response to the George Floyd riots, adding to the political unrest in the US. Trump ordered law enforcement to clear the area outside the White House of protesters using teargas and flash-bang grenades, in order to take a photo in front of the St John’s Episcopal church holding a Bible. He received criticism both for the use of the Bible in such a situation and for the use of force against citizens to ensure the photo could be taken. Trump’s actions did not trigger a shift in risk sentiment however and the safe-haven greenback extended its losses against its G10 peers this morning.
Sterling enjoyed some gains on reports of more flexibility in the UK’s Brexit position after talks resumed yesterday and started to yield a hint of progress. The European Union expects the UK to show more willingness to compromise on issues regarding fisheries and trade rules, despite UK Prime Minister Boris Johnson’s spokesman referring to such expectations as “wishful thinking by the EU”. The UK has great incentives to avoid tariff barriers and to minimise the incremental costs that would come with a hard exit from the bloc, which may be why markets continue to bet in favour of a reached consensus between the UK and EU. The hopes around the negotiations continued to offer support for the pound this morning. The deadline to extend a transition period beyond the end of this year is at the start of July. Today is a light day on the UK economic calendar, with Markit services and composite Purchasing Managers’ Indices being the main releases of note. Markets continue to keep their eyes open for further developments in the Brexit talks.