Daily FX Wrap: Dollar attention directed at FOMC whilst Cable shrugs off firmer CPI


Overall, a relatively contained European session for the Dollar, with the index consolidating throughout the day within a 92.150-388 band (ahead of the YTD low at 92.124) as participants zeroed in on the FOMC Minutes (Full preview available in the Research Suite), whilst State-side stimulus could involve a “skinny” deal of some USD 500bln, although an agreement is yet to be reached. Looking ahead, tomorrow will see the weekly release of the Initial and Continuing Jobless claims, alongside the Philly Fed Survey and comments from Fed’s non-voter Daly.


All non-US Dollar have displayed varying degrees of gains vs. the USD during European trade, albeit more so on technical factors given the absence of fresh fundamentals. NZD/USD remained the top performer in the G10-space having had rebounded off support at 0.6600 and thereafter topping its 21 DMA (0.6621) before encountering a barrier at 0.6650. Similarly, AUD/USD surpassed mild resistance at 0.7237-43 before rising above its 200 WMA (0.7255) to a high of 0.7275 as it eyes 0.7295 (Jan 31st high) ahead of 0.7300. Meanwhile, the Loonie experienced modest weakness (some 10 pips) as CPI metrics missed across the board, whilst the average of the BoC measures also cooled. Nonetheless, the Loonie kept its composure, with the pair remaining below its 200 DMA (1.3169). 


Divergence in the core European FX after initially taking their cue from broader Dollar action. Cable gave up its post-CPI strength and some more amid Brexit-related commentary highlighting that the scope for successful negotiations remains narrow. That being said, BBC’s Adler noted that the EU still believes that a post-Brexit deal is more likely than not, albeit only just. GBP/USD trickled lower from its CPI high of 1.3267 to briefly dip below 1.3200 in the latter part of European trade. Conversely, EUR/USD remained flatlined since the start of the day and is poised to end the session towards the middle of a tight 1.1924-52 band, with eyes on Belarusian developments as EU leaders met to draw up a sanctions list after officials reaffirmed that they do not recognized the results of the elections. A sanctions list is expected to be revealed towards the latter part of the week.


Another display of deviation, with the JPY poised to end the European session around the middle of its 105.103-605 intraday parameter, with technicians flagging 104.86 (78% Fib of the Jul-Aug rise) upon a break below 105.00. CHF meanwhile reversed course after earlier strength, with central bank intervention not to be dismissed. EUR/CHF looks to end the European day back on a 1.08 handle having had printed a base at 1.0770.


A firm European session for the Yuan as a result of firmer PBoC CNY setting. USD/CNH was driven lower during the APAC session and briefly traded sub-6.9000 for the first time since January, but the pair is poised to end the European day little changed and in the middle of a 6.8977-9175 range. Meanwhile, the Yuan strength influenced some EMs to join in, notably the Turkish Lira ahead of the CBRT rate decision tomorrow. USD/TRY fell from a high of 7.3800 to levels sub-7.2800.

19 Aug 2020 - 15:01- - Source: newsquawk

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