Monex: Dollar krabbelt op in aanloop naar Fed-bijeenkomst
The euro was trading on the back foot against most majors yesterday while lightly strengthening against the dollar following selling traction in the USD as equities rallied amid corporate deal-making. European Central Bank President Christine Lagarde who spoke to lawmakers in the European Parliament on Monday stated that the ECB is confident that a “good solution” will be found with respect to the German Feral Constitutional Court ruling on the ECB’s bond-buying programme and signalled the central bank’s willingness to play a more active role in responding to the ruling. This is the first time the ECB indicates any willingness to accept the ruling as policymakers were reluctant to comment on the ruling so far, but yesterday’s speech suggested that the central bank is willing to work to defuse a crisis that could see the Bundesbank eliminated from participating in the programme.
The US dollar spent another day in the red against the whole G10 currency board as risk-on sentiment continued to drive currency markets. US shares extended their advance amid a slowing virus cases count and improving economic data, with the Nasdaq composite rising to a record and the S&P500 index now erasing all its losses for the year. This morning, the currency managed to find its footing in the G10 space and pared back some of its losses from the past week in the buildup to the Federal Reserve meeting that starts today. The Fed announced in a statement yesterday to have expanded its Main Street Lending Program. Fed Chair Jerome Powell stated to be confident that “the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period”. Businesses who participate in the programme will be able to defer principal payments on their loans for two years instead of one now, while interest payment deferrals will remain unchanged at one year. The Fed decreased the loan minimum to $250,000 down from $500,000 and extended the term to five years up from four. The programme will be open to eligible lenders “soon”. The move comes ahead of the Federal Reserve announcement on Wednesday, where the central bank is likely to leave rates unchanged while remaining an accommodative stance.
Sterling managed to climb to fresh highs against the dollar during yesterday’s later trading session after having underperformed against all majors as the deadlock Brexit talks continued to weigh on the currency. Much of yesterday’s rally may be attributed to the performance of US equities via risk outlook. This morning, the pound took on some water in its pair against the USD ahead of the Federal Reserve meeting while GBPEUR remained stable. UK Prime Minister Boris Johnson will talk his cabinet through plans for easing restrictions today after officials reported the lowest number of Covid-19 related deaths since lockdown measures were first imposed. The UK will also start trade talks with Japan today as the nation currently benefits from the EU-Japan trade deal that was signed in 2018. The British government intends to build on the existing EU-Japan deal if it would exit the EU at the end of 2020. International Trade Secretary Liz Truss said in a statement that the Government aims to “strike a comprehensive free trade agreement that goes further than the deal previously agreed with the EU, setting ambitious standards in areas such as digital trade and services”, as “this deal will provide more opportunities for businesses and individuals across every region and nation of the UK”