Daily Market Update

Not Dominant, but Resilient, Buck Gains

June 19, 2020

The U.S. Dollar is trying to close the week in the positive, with ranges across the board looking about 1.0% better for the buck since the start of the week.

Overview

Recent news of progress with China, a rare feature in headlines, means that trade could actually improve as Chinese officials pledged to purchase more agricultural goods from the U.S.

It seems that this week’s established reality that COVID-19 will not simply go away, and the accommodative financial environment being implemented by all regions gave reason to doubt other currencies and give back some value to what was a quickly-sinking greenback for weeks. However, the buck is vulnerable, and we are seeing a decline in the correlation with being a safe-haven. Additionally, an amended relationship with China means global growth and could dent the buck again easily.

No major data and planned demonstrations for the observance of Juneteenth today will likely keep market talk somewhat quiet. If WTI Crude prices go above $40.00, expect fluctuations in particular for CAD and MXN. Both neighbor currencies have lost ground this past week but are trying to close even or higher.

 

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

 

 

EUR

The Euro depreciated by 1.5% this week following hesitation in certain EU member nations to push for the rescue package’s implementation. Once more, European stability is being tested as today marks a major meeting of leaders to try and get this done. Germany’s Chancellor Angela Merkel has faced difficulty exercising her diplomatic muscles while European Central Bank President Christine Lagarde warned strongly against not passing this aid as she envisions big problems moving forward without it.

As a reminder, the ECB has a 0.0% benchmark interest rate with a negative deposit rate of (-0.5%), so the monetary tools have been exhausted. This could make or break the Euro and we will know Monday.

 

GBP

The Pound is under scrutiny with many issues surrounding the U.K. economy including the dreaded need to revamp Brexit negotiations and a downgraded outlook for the economy. Bank of England Andrew Bailey made clear support will be there although monthly injections of QE will slow down. Indeed, the U.K. is covering many tasks at once that look less attractive to traders. We feel Sterling could make a comeback if some positive results come from re-negotiating their Brexit strategy.

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