European currencies outperform on reduced no-deal Brexit likelihood, safe haven up on risk-off play
US dollar lags heavily as domestic political risks rise, and bond yields drop again.
EUR/USD: Outperforming against the lagging US dollar
There wasn't a lot of data on the economic calendar for the eurozone to begin with, but what little it offered showed Germany's Institute for Economic Research (IFO) business climate figure come in slightly above expectations, which in turn are near 2009 lows. GfK's consumer climate release is up next later today, as well as a German 10-year bond auction following what has been a drop in yields on Monday's Purchasing Managers' Index (PMI) miss. On the US side, Federal Reserve (Fed) members will be speaking tonight and every night for the remainder of the week, though unlikely to stray significantly from last week's tone following a 0.25% Fed rate cut. The US dollar lagged the most on rising political risks and another consecutive drop in bond yields, while European currencies outperformed on the reduced likelihood of a no-deal Brexit.
GBP/USD: Pound experiences volatility as parliament set to return
The focus for this pair this pair was fully on Brexit news, whereby the Supreme Court ruled that UK PM Johnson’s suspension of parliament was unlawful and sending this pair's price surging higher for the session. The euro and pound outperformed against the remaining FX majors, and while the news was political, it did move in line with the pair’s technical overview that has been showing more positive technical bias and buoyed by USD weakness no doubt. In terms of economic data, more low-impacting items for the remainder of the week except for tomorrow's panel discussion that'll include the Bank of England's governor Carney.
USD/JPY: Technicals conflicted as risk-off play aids the yen in finishing higher against the dollar
Yesterday morning's Bank of Japan (BoJ) governor Kuroda speech gave no hints of whether further easing would take place in October following last week's decision to keep monetary policy unchanged with its short-term rate at -0.1% and the Japanese government 10-year bond yield around 0%. And as of this morning, a BoJ board member today said that the central bank would ease further without hesitation if the 2% inflation target was lost, with the minutes released this morning showed that its members mentioned the need for a preemptive response to downside risks to both the economy and prices. As for the pair’s price which dropped with the yen outperforming on a risk-off play and the greenback in retreat as US yields drop and political risks rise, it has enticed more shorts into closing out and fresh long into initiating, with retail bias up 5% to a majority long 56%.
USD/CAD: Energy price drop hurts commodity currency CAD, but USD underperforms even more
Although the Canadian dollar was the second-worst performer amongst the FX majors following a plummet in energy prices affecting its energy underlying, it was the US dollar that underperformed even more, and in the process taking this pair’s price to a lower finish and just above the last of its main moving averages, the 50-day MA. With a dearth of Canadian data for the remainder of the week, the items affecting this pair's price include USD related items like tonight's Fed speak, and the Energy Information Administration's (EIA) latest figures regarding US oil inventories, likely to effect oil and hence CAD's energy underlying. In terms of sentiment, retail bias has risen by 5% to a heavy short 67%, and is the only one of the FX majors where both retail and institutional bias are pointing in the same direction.
AUD/USD: Finishing higher yesterday following central bank governor’s comments but down this morning as Asian session turns red
The focus this morning was on the Reserve Bank of New Zealand's (RBNZ) decision to keep monetary policy on hold at 1% following last month's 0.5% rate cut. The soft commodity currency remains under pressure, with the AUD/NZD cross showing ongoing positive technical bias. Out of Australia, yesterday's Reserve Bank of Australia (RBA) governor Lowe speech was more bullish than expected, and taking the Australian dollar as a result and ahead of next week's monetary policy announcement where markets are majority pricing in a 0.25% rate cut albeit less than before the RBA governor's speech, and with a dearth of Australian data for the remainder of the week. As of this morning however, the commodity currency is back under pressure as stocks take a hit and commodities retreat.
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