Forex Market News and Analysis

[TraderSmith]

Forex Market News - Dollar Up Over COVID-19 Worries and Potential U.S. Tax Hikes

The dollar was abreast of Wednesday morning in Asia near a four-month high, as COVID-19 concerns, potential U.S. tax hikes, and tensions over tit-for-tat sanctions between China and therefore the West turned investors towards the safe-haven asset.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.04% to 92.382 by 12:18 AM ET (4:18 AM GMT).

The USD/JPY pair inched down 0.05% to 108.50.

The AUD/USD pair was down 0.21% to 0.7606 and therefore the NZD/USD pair was down 0.30% to 0.6983.

The USD/CNY pair inched up 0.10% to 6.5227. The sanctions imposed on China by the U.S., Europe, and the U.K. over human rights issues, prompting the previous to retaliate with sanctions of its own, still increase investor market concerns.

The GBP/USD pair edged down 0.17% to 1.3727.

The dollar index rose to a two-week high because the Asian session opened and was near the four-month record of 92.506 set earlier within the month. The index “looks determined to check the highest end of a replacement, higher 91-93 range we expect will form in coming weeks,” Westpac analysts said during a note.

“Extended European lockdowns have sapped confidence during a synchronized global rebound; meanwhile, the U.S. will have a powerful rebound in coming months amid a powerful vaccine roll-out, stimulus payments, and economic re-openings,” the note added.

A third wave of COVID-19 cases in Europe prompted fresh lockdowns in several countries. Germany extended its lockdown until Apr. 18, with France and Italy also extending restrictive measures, and therefore the euro fell towards a four-low of $1.18360.

Across the Atlantic, the U.S.’ data safety monitoring board warned that the info submitted by AstraZeneca (NASDAQ:AZN) PLC and therefore the University of Oxford in support of its COVID-19vaccine might be outdated.

Also nudging investors towards safe-haven assets was U.S. Treasury Secretary Janet Yellen’s testimony before the House Financial Services Committee, where she said that future tax hikes are going to be needed to buy infrastructure projects and other public investments.

Federal Reserve Chairman Jerome Powell, testifying alongside Yellen, added that an expected near-term spike in inflation is going to be transitory. His comments prompted the benchmark U.S. Treasury yield to drop to 1.6048% on Wednesday.

Yellen and Powell will repeat their testimonies before the Senate Banking Panel later within the day.

In cryptocurrencies, bitcoin fell below $54,000, but two weeks after hitting a record high of $61,781.83.

 

[TraderSmith]

Forex Market News - Euro set for biggest monthly drop since mid-2019; yen shorts grow

The euro languished below $1.18 on Monday because the prospect of tougher corona virus curbs in France and Germany weighed on the short-term outlook for the European economy.

The euro slipped 0.2% in London trading at $1.1774, nearing last week's four-and-a-half-month trough of $1.1762. On a monthly basis, it's down 2.3%, its biggest drop since July 2019.

Compounding the single's currency woes are the widening rate of interest differentials between German and U.S. yields. The spread for 10-year debt widened to 200 basis points from 150 bps at the beginning of the year, boosting the dollar.

"In a nutshell, the U.S. economy is way stronger and miles ahead within the immunization game compared to Europe's and Japan's, and this ultimately translates into the Fed normalizing policy years before the ECB or the BoJ," said Marios Hadjikyriacos, a strategist at brokerage XM.

The euro's woes have worsened as Europe's faltering vaccination programmed runs into a wave of latest infections, whilst positioning data showed investors remain heavily long Euros, a bearish sign for investors. And

"Much focus will remain on the virus situation in Europe and whether lock downs can slow rising case numbers and also whether the slow pace of vaccinations can finally reach exit speed," ING economists said during a daily note.

The dollar held firm against other currencies as a small risk-off sentiment rippled through global markets, with U.S. stock futures in negative territory in quiet quarter-end re balancing flows.

YEN SHORTS GROW

Against a basket of currencies, the dollar steadied at 92.810, slightly below a November 2020 high of 92.92 hit last week.

Weekly positioning data showed the broad trend of growing dollar bullishness remained in play. Hedge funds cut their overall short dollar bets to their lowest levels since June 2020 while ramping up their bearish bets on the yen.

Short yen positions have grown in recent weeks with hedge funds building their net short bets to 33% of open interest, consistent with ING data.

Steadying stock markets offered some support for the yen, but falling bond yields and expectations of a worldwide economic rebound have rekindled short bets. The yen is among the worst- performing currencies thus far this quarter, down 6% loss the dollar.

Virus-driven caution also helped the dollar higher against the Australian and New Zealand dollars and sterling, and it rose against oil-linked currencies because the re-floating of the ship blocking the Suez Canal pushed crude prices down by about 1.5%.

The Aussie was last down 0.3% at $0.7621 on Monday and therefore the New Zealand dollar had dropped 0.3% to $0.6978. Sterling slipped 0.2% to $1.3767.

 

[TraderSmith]

Forex Market News-Dollar gains as U.S. recovery bets stoke Treasury yields

The dollar gained against major currencies on Tuesday and climbed to a one-year high against the yen, as accelerating U.S. vaccinations and plans for a serious stimulus package stoked inflation expectations and raised Treasury yields.

The safe-haven dollar found support across the board as investors also digested the fallout from the collapse of highly leveraged investment fund Arch egos Capital.

The dollar index rose above the 93 mark and was last up around a 3rd of a percent at 93.185, its highest level in four months.

The dollar also rose above 110 yen, A level not seen since March last year, and was last up 0.5% on the day.

It is on target for the simplest month since late 2016, with the top of Japan's financial year this month driving up dollar demand as companies square their books.

Analysts said the yen was also susceptible to higher inflation expectations within the United States than in Japan and an increase in long-term U.S. yields.

Ten-year U.S. Treasury yields rose to 14-month highs on Tuesday, the day before President Joe Biden is about to stipulate how he intends to pay money for a $3 trillion to $4 trillion infrastructure plan.

"USD/JPY has far and away the very best correlation amongst G10 currencies with long-term US yields," said Lee Hardman, currency economist at MUFG during a note.

"Upward pressure on long-term US yields is predicted to be supported by another fiscal stimulus policy announcement from the Biden administration."

The euro weakened on the day to $1.17290, its lowest level since November.

Tougher coronavirus curbs in France and Germany have dimmed the short-term outlook for the European economy. A widening spread between U.S. and German bond yields is adding pressure on the euro.

The monthly U.S. non-farm payrolls report are going to be closely watched at the top of in the week , with Federal Reserve System policymakers thus far citing slack within the labour marketplace for their continued lower-for-longer stance on interest rates.

"In every week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support," Rabobank currency strategist Jane Foley wrote during a report.

However, "the market is at risk of pricing in an excessive amount of inflation risk," meaning "we see scope for the USD to melt within the months ahead," the report said.

 

[TraderSmith]

Forex Market News- U.S. dollar to stay strong for a minimum of another month: Reuters poll

The U.S. dollar will remain strong for a minimum of another month, consistent with a Reuter’s poll of exchange strategists, who still forecast that the currency will weaken within the long run.

Following a spike in benchmark Treasury yields, which touched a 14-month high on Tuesday, the greenback is up about 3.5% this year, a solid revival given it started the year on the defensive.

Trillions of dollars in expected government infrastructure spending and a strong U.S. economic recovery will likely keep bond yields rising and therefore the dollar well-supported within the near-term, forcing reassessments of bets against the currency.

Indeed, the newest trader positioning data showed currency speculators trimming their net short positions to rock bottom level since June 2020.

"We started the year dollar negative both within the short-term and within the long-term but the shift within the environment is so dramatic that staying dollar negative within the short-term was very risky," said Steve Englander, head of G10 FX research at Standard Chartered (OTC:SCBFF).

Over 85% of analysts, or 48 of 56, who answered a further question said the present dollar strength would last a minimum of another month. Of the 48, 11 said it might last three to 6 months and 16 said it might last quite six months.

The other eight said the dollar's revival was already over or would end in but a month.

But beyond short-term outperformance, the March 26-31 poll of over 65 FX strategists in total predicted the dollar would weaken over the 12-month horizon.

Those forecasts line up with a separate Reuter’s survey of fixed-income strategists published last week who weren't expecting sovereign yields to be tons above current levels over the approaching year. [US/INT]

For a graphic on Reuters poll graphic on the EUR/USD and U.S. 10-year Treasury yield outlook:

"I don't think we're getting to have a huge run-up on the dollar within the way we did a few of years ago. I feel we will go a touch bit further," said Jane Foley, head of FX strategy at Rabobank.

Analysts still expect the euro, which marked its worst half-moon performance since 2015 this year, to strengthen against the dollar over subsequent 12 months.

For a graphic on Reuters poll graphic on currency market outlook:

Changing hands at around $1.173 on Wednesday, the euro was expected to trade around $1.20 within the next six months then rise to $1.22 during a year, clawing back the 4.0% it's dropped thus far in 2021.

However, that year-ahead forecast was rock bottom since November and was in danger of an extra downgrade.

Fifteen of 17 analysts who answered a separate question said risks to their euro forecasts were skewed to the downside.

Much of the negative outlook was because the euro zone was lagging its peers in immunizing its population, putting its major economies in danger of more large-scale lockdowns.

"My forecasts are for the euro to travel copy to $1.21 on a 3 to 6 month view, but I'm not feeling comfortable thereupon. I'm starting to think I'm getting to need to bring that lower over subsequent few weeks approximately," added Rabobank's Foley.

Despite the dollar gaining across the board this year, very similar to in previous cycles, it had been emerging market currencies which suffered the foremost.

While they were expected to pare a number of their recent steep losses over the approaching year, there was many selling pressure expected for developing economies' currencies over subsequent 12 months.

Nearly 60% of analysts, or 28 of 48, who answered an additional question said emerging market currencies would underperform over subsequent three months. An identical majority also said a sell-off in risky currencies was likely over subsequent quarter.

"In the very near-term the environment has become tons tougher ... We wouldn't be getting to buy emerging market currencies immediately," said Lee Hardman, senior currency analyst at MUFG, the foremost accurate forecaster for major currencies in 2020.

 

[TraderSmith]

Forex Market News-U.S. trade chief voices concern to Vietnam over currency practices

U.S. Trade Representative Katherine Tai, during a turn Thursday with Vietnam's minister of industry and trade, highlighted U.S. concerns about Vietnam's currency practices, a USTR statement said.

Tai and therefore the Vietnamese minister Tran Tuan Anh also "discussed U.S. concerns on illegal timber practices, digital trade and agriculture," the statement said.

The U.S. Department of the Treasury in December labeled Vietnam a "currency manipulator" thanks to its growing trade surplus with the United States, its large global accounting surplus and heavy exchange market intervention to carry down the worth of its dong currency.

In January, the USTR released the results of its so-called Section 301 investigation into Vietnam's currency practices. It found Vietnam's actions to down the worth of its currency were "unreasonable" and restricted U.S. commerce, but it didn't take immediate action to impose punitive tariffs.

 

[TraderSmith]

Forex Market News- Dollar Up, But Set for Weekly Drop as Investors Buy Fed’s Dovish Stance

The dollar was abreast of Friday morning in Asia but was set to finish the week with its worst back-to-back weekly drop by 2021. Treasury yields continued their retreat from more-than-one-year highs as investors increasingly bought into the U.S. Federal Reserve's pledge of continued monetary support.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.10% to 91.713 by 12:59 AM ET (4:59 AM GMT).

The USD/JPY pair inched up 0.06% to 108.81.

The AUD/USD pair edged down 0.16% to 0.7738 and therefore the NZD/USD pair inched down 0.10% to 0.7162.

The USD/CNY pair edged up 0.12% to 6.5296. Chinese economic data released earlier within the day said that the GDP for the primary quarter grew 18.3% and 0.6% year-on-year and quarter-on-quarter respectively in March. Although both figures were less than forecasted, economic process soared on a yearly basis while slowing down on a quarterly basis.

The GBP/USD pair edged down 0.14% to 1.3767.

The benchmark 10-year Treasury yield fell to a one-month low of 1.528% during the previous session, from as high as 1.776% at the top of March 2020, even after Thursday’s stronger-than-expected U.S. retail sales and initial jobless claims data.

San Francisco Fed President Mary Daly also said on Thursday that the U.S. economy remains far away from making "substantial progress" toward the central bank's goals of twenty-two inflation and financial condition when it'll begin to think about reducing its support for the economy.

Investor bets that massive fiscal spending additionally to continued monetary easing will spur faster U.S. economic process and runaway inflation drove the dollar index, alongside Treasury yields, to an almost five-month high on the ultimate day of March. However, investors now seem more willing to simply accept the Fed’s assurance that inflation pressure are going to be transitory and monetary stimulus will remain in situ for years to return.

The dollar is "still struggling to seek out its feet in April, albeit the U.S. macro outperformance narrative couldn't be more propitious," Westpac strategists said during a note.

"The DXY is trading like it's topping out now, before (we) expected,” the note added.

The Russian ruble tumbled during the previous session, losing 2% to the dollar and hitting a quite five-month low versus the euro in volatile trade. The U.S. slapped sanctions against Russia on Thursday after U.S. President Joe Biden authorized the move to punish Moscow’s alleged interference within the 2020 U.S. presidential election. Russia has denied the allegations, however.

In cryptocurrencies, bitcoin traded at $63,478, near the record high of $64,895 reached on Wednesday when cryptocurrency platform Coinbase Global Inc. (NASDAQ:COIN) made its Nasdaq debut.

 

[TraderSmith]

Forex Market News- Risk-on likely to increase into the weekly opening

What you would like to understand on Monday, April 19:

The American currency extended its decline against most major rivals because the week came to an end, as risk appetite led.

US indexes kept rallying, with the DJIA and therefore the S&P 500 reaching record highs, as solid US macroeconomic figures hint at a considerable economic comeback from the pandemic collapse. Despite the upbeat mood, US Treasury yields managed to recover some ground. The yield on the 10-year Treasury note settled at 1.59% after bottoming for the week at 1.52%.

The EUR/USD pair held near but below the 1.2000 mark, while GBP/USD soared past 1.3800, ending the week within the 1.3830 price zone.

The Canadian dollar advanced against its American rival, but the Australian currency edged marginally lower on Friday, despite the risk-on mood.

Gold prices persisted to weekly gains, ending the week at $ 1,776.30 a ounce. Petroleum prices also finished the week with substantial gains, with WTI at $ 63.13 a barrel.

Coronavirus: The US and therefore the UK continue their immunization program, advantaging most European countries, which suffer from a replacement wave of covid. Different countries have announced new lockdowns and curfews and even travel restrictions particularly from South American, where the Brazilian strain is taking its toll.

 

[TraderSmith]

Forex Market News -EUR/USD loses some ground, retreats from tops near 1.2050


EUR/USD clinched new 7-week highs near 1.2050.
The dollar sell-off bolsters the upside within the pair thus far .
Investors’ attention seen shifting to the ECB event (Thursday).

The euro cannot have a far better start of the week. Indeed, the only currency saw its buying interest exacerbated on Monday and pushed EUR/USD further north of the psychological 1.2000 yardstick, clinching at an equivalent time new multi-week highs.
EUR/USD meets resistance near 1.2050

EUR/USD ads to Friday’s gains and eventually leaves behind the 1.2000 barrier on Monday. The strong advance, however, has thus far met initial resistance within the mid-1.2000s, where sits the 100-day SMA.

The initial pessimism round the dollar dragged the US Dollar Index (DXY) to fresh lows within the proximity of the 91.00 mark, albeit managing to regain some composure soon afterwards.

The moderate retracement within the buck reflected the initial apathetic trade in US yields, with the 10-year benchmark navigating the 1.55% area before staging a Bull Run to the 1.615 region.

Nothing scheduled within the US docket on Monday, while the present Account surplus within the euro area widened to €13.3 billion in February.

Moving forward, investors are likely to stay cautious before the ECB event on Thursday, while FOMC members entered into the standard communication blackout period before the Federal Reserve System gathering on April 28.
What to seem for around EUR

EUR/USD met initial resistance within the 1.2050 zone thus far. The recent move higher within the pair has been sustained by the renewed offered bias within the dollar alongside the investors’ shift to the expansion prospect in Europe now that the vaccine campaign appears to possess gained some serious pace. Additionally, solid results from key fundamentals and therefore the improvement within the sentiment within the euro area as lately also appear to bolster the momentum surrounding the only currency.

Key events within the euro area this week: ECB rate of interest decision, President Lagarde’s news conference, European Commission advanced Consumer Confidence (Wednesday) – Flash April PMIs (Friday), ECB Lagarde speech.

Eminent issues on the rear boiler: Asymmetric economic recovery within the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence round the EU Recovery Fund.