Daily Market Update

U.S./China Relations Take Hit, Buck Sinking

July 22, 2020

The U.S. Dollar is trading in very weak ranges across the board as the fiscal integration of the European Union through a massive rescue package is improving global assets.

Overview

With a stable re-opening of the economy and an established way to aid its citizens, the Ancient continent is boasting a rosier picture than the one we currently experience here. Tensions are high as the U.S. announced a decision to close China’s consulate in Houston, a move to “protect American intellectual property” per the State Department. Houston is one of the hemisphere’s busiest ports and diplomatic as well as commercial presence is key to the world’s second largest economy. Headlines regarding countermeasures shall make impact on all markets as this is developing.

The aura of Cold War happenings continues with a hearing today by the Senate Banking Committee titled “U.S.-China: Winning the Economic Competition.” Certainly not the most positive item of focus when a pandemic is still ravaging the country. At the time of writing, an announcement over a potential vaccine being distributed in the U.S. We shall see if this reverses the current downward trend for the buck as the Bloomberg Dollar Spot Index is now at its weakest point since March 29.

 

What to Watch Today…

  • Existing Home Sales 10AM

Complete Economic Calendar can be found here.

 

EUR

The Euro is experiencing some of its best levels over the greenback since October 2018 as the news over the rescue package’s passing has strengthened the outlook for tender and economic recovery.  Details of the deal include help for the larger countries of France, Italy, and Poland, which had seen deep contractions across various indicators since March.

We believe the biggest move for the shared currency may have already passed as the build-up to the aid deal generated the most excitement and appreciation. At this point, it is clear that EU and the bloc have a more secure situation than the one across the Atlantic, but there will be interest to export as well and that is why we believe you will see less rapid increases in value and perhaps less volatility, stick to ranges.

 

CHF

The Swiss Franc is trading at its best level since March 9th, moving I similar fashion to Euro as developments and improvements to the continent are establishing the Swiss as an even more secure safe-haven. Surrounded now by allies who want to exercise fiscal discipline in unison to uplift the region, the Swiss see themselves with a very high rate of exchange and negative interest rates as policy from their central bank.

Swiss National Bank President Thomas Jordan has made comments establishing that currency intervention will be needed to prevent a stall of the economy and lowered tourism as well as commercial turn-out. The U.S. administration may have something to say on the subject as it is evaluating if the EU and Switzerland are worth deeming unfair currency manipulators.

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