FX Update – July 31 – Dollar Down Again

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USD index, Monthly

By: Stuart Cowell

The Dollar continued lower in what is now the biggest monthly decline the US currency has seen in a decade. The narrow trade-weighted USD index printed a fresh 26-month low at 92.49, the culmination of a 5% decline from the finishing level in June and marking just over a 10% drop from the highs seen in early March. US Treasury yields have printed fresh lows, with the 30-year bond in record low territory, extending declines seen since yesterday’s release of US Q2 GDP data, which came in at a dismal -32.9% y/y, although this met the consensus expectation. President Trump’s tweeted suggestion that the presidential election in November should be postponed has also been in the mix, adding a political element to arguments that the pandemic has precipitated a further erosion in the dollar’s reserve currency status. The EU’s recently greenlighted recovery fund is also seen as the first step in shared fiscal responsibility in the Eurozone, which by all accounts has triggered a re-weighting of euros in currency portfolios at the expense of the Dollar. Gold prices have lifted to back within a couple of dollars of the record nominal high seen earlier in the week at $1,974.90. EURUSD, amid its sixth consecutive week of accelerating gains, has pegged a fresh 26-month high at 1.1908Cable pinned a new five-month peak, at 1.3143USDJPY posted a five-month low at 104.19AUDUSD saw a 17-month high at 0.7228USDCAD has been an exception to the US Dollar weakening theme, with the pairing consolidating in the lower 1.3400s after making a nine-day high at 1.3461 yesterday. The Canadian Dollar has been affected by the drop in oil prices over the last day. Front-month USOil futures hit a three-week low on Thursday at $38.72, and while recouping to levels over $40.0, remain down by over 2.5% from week-ago levels.

The big tech companies SMASHED it. APPL. $11 bln profit on $60 bln revs, 4 for 1 stock split coming, AMZN $5bln profit as income doubled & sales up 40%. Alphabet ad revenue down but still beat estimates & FB rev. up 11%, as activity increased 13%. Other companies reported mixed results. Today – Eurozone CPI & GDP (Q/Q) (Prelim), US PCE, Chicago PMI & UoM Sentiment & Exp., CAD GDP (m/m). Earnings are due from Exxon, Chevron, Phillips 66, Caterpillar, Merck, and Colgate.


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