• USD gains against most majors with bid for havens in clear risk-off mood.
• CAD follows losses against the dollar but out-performs.
• EUR back below 1.18; virus restrictions loom in the continent.
• GBP trades in mid 1.28s as chief medical officer sounds the alarm on COVID-19.
• JPY gains to strongest mark since mid-March, tests 104 level.
• AUD tracks broad market mood but finds support in declining cases in Victoria.
• MXN under-performs in risk-off trading and 2% drop in crude oil prices.
FX Market Update - Markets are starting out the week in the same way they traded through the latter part of Friday’s North American session, with risk sentiment on the back foot and with the USD rising against practically all major currencies. The dollar’s gains to start the week, which really only began in the later hours of the Asia session, follow sharp declines in overseas equities (Euro Stoxx 50 –2.5%, Shenzen -
1%) that is spilling over into weak US stocks futures (S&500 –1.8% at writing) as investors worry over climbing COVID-19 cases in certain major economies and stimulus discussions in the US. On the latter, the passing of SC Justice Ginsburg on Friday evening looks set to provoke further tensions between Republicans and Democrats as Pres Trump attempts to force through a nominee before the end of the year. The clear sell-off in risk has left the JPY with a solid 0.4-5% gain after reaching as low as the 104 mark exactly—its strongest level since Mar 12—while the MXN and the ZAR sit at the opposite of the spectrum with a 1.4% and 1.5% decline respectively. Note that Japanese markets are closed Mon-Tue. WTI and Brent oil are each down by about 2% on the day which is also not helping the NOK (down 1.2%) but somehow the CAD is relatively sturdy as it tracks a 0.2% decline—the smallest amongst the losing major currencies; the EUR and GBP are following the dollar mood with ~0.5% declines. The AUD is trading a tad better than most of its peers (-0.3%) as Victoria recorded its lowest new virus cases in three months and also thanks to some economic cheerleading by the nation’s PM. The RBA’s Debelle speaks tonight and may discuss the possibility of additional easing (or not). The week ahead brings a flood of central bank decisions and speeches. Sweden, Hungary, New Zealand, Thailand, Czech Republic, Switzerland, Turkey, Mexico, Colombia, etc. have monetary policy announcements scheduled over the next few days. However, only Mexico and Colombia are expected to reduce their respective policy rates by 0.25% as all other central banks maintain a holding stance— statements and pressers will be monitored for hints on future policy paths. Last night, the PBOC left its loan prime rates unchanged as it appears content with the current pace of the economic recovery, but may ease later in the year. Off-calendar risk will be the main driver of price action today with no major events or data releases scheduled.
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