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FX Update – April 21 – 2020
By: Stuart Cowell
Currencies have once again adopted a risk-off positioning formation as global stock and commodity markets tumble. The Yen, closely followed by the Dollar, have taken the lead in the outperforming pack while the commodity currencies have taken a lead in the underperforming group. Asian stock markets saw their biggest single-day sell-off in a month while the pan-Europe STOXX 600 equity index fell by nearly 2.5% as S&P 500 futures declined by over 1.5% after the cash version of the index closed out yesterday 1.8% for the worse. Yesterday’s oil rout spooked investors, and while some economies are starting to reopen from lockdowns, the road back to normalcy is clearly going to be a long one. Amid this backdrop, the narrow trade-weighted USD index printed a thirteen-day high at 100.37 while EURUSD concurrently ebbed to a four-day low at 1.0819. The Yen outperformed, moderately against the Dollar, but more so against the Euro and even more versus the underperforming commodity currencies. USD-JPY printed a five-day low at 107.29, while EUR-JPY forayed into 19-day low territory. AUD-JPY, a forex market barometer of risk appetite in global markets, and a currency proxy of China, declined by some 0.7% in making a two-week low at 67.40. AUD-USD printed a four-day low at 0.6270. USD-CAD rallied to a 15-day high at 1.4266. While yesterday’s rout in the expiring May WTI contract, and the aberration of negative pricing has come and gone, June futures today have been highly volatile, opening above $21.0, diving to a low at $11.79 before rebounding back above $15.00. One potential support for oil prices is the fast reducing space at crude storage facilities, which is likely to force oil producers into big output cuts. President Trump, also, said that the US is considering halting Saudi oil imports.
EURUSD ebbed to a four-day low at 1.0820, with the pair driven once again by a broader move in the Dollar. EURUSD continues to trade a little to the south of the halfway mark of the volatile range that was seen during the height of the market panic in March. The rapid deployment of monetary stimulus measures by the Fed, and expectations for more, have impacted the Dollar in recent weeks, having satiated what had been a surge in demand for the world’s reserve currency.
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