FX Update May 25; USD Holds the Bid

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EURUSD & GER30, H1

By: Stuart Cowell

The Dollar has remained buoyant amid narrow ranges in early-week trading so far. Conditions will be thin today with both UK and US markets out for public holidays. Tensions between the US and China continued to build over the weekend. Amid the developments, the US will be adding another 33 Chinese companies and institutions to an economic blacklist on the accusation that they are helping China spy. The White House national security adviser, meanwhile, said economic sanctions would likely be imposed on Hong Kong and China if Beijing moved ahead with its proposed national security law for Hong Kong. Beijing, for its part, said it will not back down from the “technology warmongering” while warning of “ample countermeasures.” The narrow trade-weighted USDIndex edged out a one-week high at 99.93, while EURUSD ebbed to a one-week low at 1.0875. USDJPY matched Friday’s high at 107.78, though didn’t breach it. AUDUSD settled in the lower 0.6500s, above the 0.6506 low that was seen on Friday. USDCAD consolidated gains seen in the latter part of last week, which on Friday left a one-week high at 1.4050. The pair settled near the 1.4000 mark. Oil prices are moderately firmer today, though remain off the 11-week highs seen last week.

In stock markets, the Nikkei 225 rallied 1.7% and posted its highest daily close since March 6th, while the Hang Seng and China’s main indices traded in the red, though pared losses during the PM session. The DAX (GER30) gapped on open to R1 at 11,215, before slipping to 11,100, following the in-line final reading of Q1 GDP at -2.2%. German Ifo business confidence rebounded more than anticipated, with the headline reading lifting to 79.5 from 74.2 in April. This is still far below the 86.0 seen in March, but at least there is a sign that confidence is coming back with the easing of restrictions, which is being accelerated across Germany at the moment. The GER30 currently trades back up at 11,190.

On the coronavirus front, focus remains on reopening economies and a rebound in economic activity. Brazil remains a rapidly emerging hotspot, and now has the second highest level of confirmed cases, behind the US


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