Monex: EUR/USD consolideert op hoogste punt in 18 maanden

22 juli 2020

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

EUR

Whereas yesterday’s immediate reaction of the euro to the breakthrough in the EU recovery fund talks was moderate in the early trading session, the currency reached an 18-month high against USD later on during American hours and has been hovering around that level until this morning. This has likely also been driven by broad dollar weakness, as much of the optimism around the EU deal had already been priced into the euro, allowing the currency to continuously reach new highs over the last week. The approval of the EU recovery fund bodes well for the euro outlook given that the market has overcome a large downside risk factor for the euro and the eurozone economy, as well as EU cohesion. European Central Bank President Cristine Lagarde will speak later in the afternoon and likely praise the EU leaders for their achievement, as since the beginning of the virus outbreak, Lagarde has repeatedly been urging for fiscal stimulus to supplement the monetary measures taken by the central bank. 

USD

It doesn’t happen too often, but yesterday was one of those days where the dollar got its teeth kicked in by everything imaginable. Gold rose 1.42%, and continues to rise this morning, WTI closed just shy of $42 per barrel - its highest level since the March sell-off - and in FX markets, nearly all currencies took a chunk from the greenback. US equities closed mixed, with the DJIA and S&P 500 both posting gains while the Nasdaq marginally dropped, while the US yield curve fell across the board. Most notably, the 3-10 year chunk of the curve fell over a basis point in yesterday’s session. The catalyst was unknown, but likely stemmed from the fact that the US continues to battle to control the virus outbreak domestically as the rest of the world eases lockdown measures and begins their economic recoveries. Yesterday, President Donald Trump told Americans “it will probably get worse before it gets better” as he urged Americans to wear a mask. Additionally, Majority Senate leader Mitch McConnell told Politico that the next wave of stimulus won’t be passed in the next two weeks. Republicans remain divided on where to allot the $1trn spending package with the Trump administration looking for a payroll tax cut, which isn’t sitting well with his own party. With the gap between the Republicans $1trn spending pledge and the Democrats $3.5trn desired package yet to be bridged, the fifth round of stimulus is likely to be delayed until August. Yesterday, California posted another record increase in the number of new cases at 14,369. This saw the total number of cases in the most populous state rise to 409,305 and surpass New York, the previous epicentre, which sits at 408,181.

GBP

Sterling is underperforming the rest of the G10 this morning, after a strong day yesterday. The Financial Times is reporting this morning that the UK has abandoned hopes of signing a trade deal with the United States before November’s Presidential elections. A fast trade deal with the world’s largest economy had previously been an ambition for Boris Johnson’s Government, although given the complexity of issues such as US access to UK healthcare and food markets this morning’s news comes as little surprise. Viewed in this light, US secretary of state Mike Pompeo’s trip to the UK this week seemed more a matter of rallying support for geopolitical containment of China as opposed to UK-US trade. Pompeo called for the UK to join a “broad alliance” of states in imposing sanctions against China for the oppression of Uighur people. Speaking in a press conference, Pompeo said “We think that the entire world needs to work together to ensure that every country — including China — behaves in the international system in ways that are appropriate and consistent with the international order”.