Summary: FX was featureless in thin trade despite many potential catalysts across the globe, due to twin holidays in the UK and US, where the largest global trading centres reside. The Dollar Index (USD/DXY), a favoured gauge of the US currency’s value against a basket of six foreign rivals, was little changed at 99.80 (99.90). Upbeat German Business Climate from its IFO Survey in April to 79.5 from 74.3 in March, bettering forecasts at 78.3, steadied the Euro to 1.0897 from 1.0902 yesterday. Sterling rallied to 1.2188 from 1.2166 after Prime Minister Boris Johnson said yesterday that Britain will reopen thousands of high street shops, department stores and shopping centres next month. Elsewhere, Chinese intentions to get Hong Kong to adopt new national security laws saw protests in the territory turn ugly. Tear gas and water cannons were used and close to 200 protestors were arrested. The US named 33 Chinese companies that could be restricted from listing on the American exchanges or raising money from US investors. Against the Offshore Chinese Yuan, the Dollar (USD/CNH) ended flat at 7.1470. The Australian Dollar was little changed at 0.6547 from 0.6537 yesterday. USD/JPY was modestly higher at 107.72 (107.67) with risk appetite much in check in the thin markets. Wall Street stocks climbed with the DOW up 1.17% to 24,768 (24,520). The S&P 500 rose 1.2% to 2,995 from 2,965 yesterday.
Yesterday’s economic calendar was light. Apart from Germany’s IFO Business Sentiment Climate, Germany’s Final Q1 GDP matched forecasts at -2.2%.
On the Lookout: We can expect more consolidation today with traders monitoring developments in Hong Kong, and the ongoing US-China tussle. President Trump was notably silent on Hong Kong following yesterday’s protests. Hopes of a global economic restart buoyed risk sentiment.
Today’s economic data calendar picks up. New Zealand kicks off with its Trade Balance which is expected to show an improvement in the Surplus. Japan follows with its All Industries Activities, Services Producer Price Index (SPPI, a leading indicator of consumer inflation), and the Bank of Japan’s Core CPI report. Euro area data start with Switzerland’s Trade Balance followed by Germany’s GFK Consumer Climate read, and the UK’s CBI (Confederation of British Industry) Realised Sales report. The ECB releases its Financial Stability Review. US data follow with US House Price Index, S&P/Case Shiller Composite 20-Year House Price Index, Conference Board Consumer Confidence, and New Home Sales. FOMC member and Minneapolis Fed President Neil Kashkari speaks in a panel discussion on the Covid-19 pandemic. Outgoing Bank of Canada Governor Stephen Poloz speaks together with his Senior Deputy Carolyn Wilkins before the Senate Committee on National Finance (tomorrow morning Sydney time 7 am).
Trading Perspective: The Dollar’s fate lies in the balance with risk appetite still the main influence for FX. The month of May has seen the currencies consolidate within ranges. While breakouts were attempted, the overall ranges stuck. The Euro, for example traded between 1.0770 and 1.1020. Its difficult to see a breakout of either extreme, for now.
The US-China tussle remains in the forefront of markets. The relative silence of President Trump and other nations following China/Hongkong saw risk steady and US stocks rally. With economies reopening, traders will focus on the upcoming data releases.
We look at the latest market positioning in the various currencies tomorrow. Meantime the currency reports today see further consolidation.