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Overview
The USD-index extended its recent upward trend after breaking above the 50% Fib retracement of the pre-FOMC high to recent low in early European trade, with quarter and month-end demand said to be adding to the upside.
Consequently, EUR tumbled against the USD however found support around the 1.0700 level, with lingering concerns over Greece’s liquidity issues and the slight miss on Eurozone Core CPI (0.6% vs. Exp. 0.7%) offsetting the positive German Unemployment figures (6.4% vs. Exp. 6.5%). Amid the strength in the USD and today’s deadline for reaching a preliminary deal on Iran’s nuclear program, oil prices slumped throughout most of the session, weighing on commodity-linked currencies, including CAD. However, USD/CAD pared a sizeable part of gains amid the better-than-expected Canadian GDP (-0.1% vs Exp. -0.2%), with a slight rebound in WTI added further strength to CAD. Analysts also note that moves in equities today could lead to selling pressure in CAD, EUR and GBP in Q-end, whereas USD/JPY could see a small bid as >USD 500mln is expected to be bought in the pair. This was something that was observed throughout the session but heading into the European close the USD-index began to move lower, providing a boost to its major counterparts, notably GBP, with GBP breaking above 1.4850 as some of the month-end demand that had been supporting USD began to abate.
Looking ahead, tomorrow sees Chinese Manufacturing PMI, HSBC Manufacturing PMI, and a host of Eurozone Manufacturing PMIs, while across the Atlantic the US is due to release ADP Employment Change, Manufacturing PMI and DoE Crude Inventories. In terms of speakers, Fed’s Williams and Lockhart are both due on the slate, while the German 2020 Bond Auction will provide the main fixed income release of the session.
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