USD ending week with broad gains – Scotiabank

The US Dollar (USD) is strengthening broadly—albeit modestly—into Friday’s NA session and showing gains against all of the G10 currencies, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD trading broadly higher to end the week

"The overall tone is quiet heading into the weekend, and overnight developments have been limited. JPY is the greatest underperformer, weakening in response to the publication of a joint US/Japan statement affirming their commitment to market determined exchange rates. NZD, SEK, NOK and CHF are also soft and their performance is offering no clear signal in terms of the broader market’s tone. GBP and AUD are down marginally while the CAD and EUR are flat. Equity futures are pulling back modestly from Thursday’s record high and Treasury yields are largely unchanged."

"In commodities, crude prices are showing renewed signs of stability with WTI once again bouncing off of near-term support around $62/bbl, and copper prices are showing renewed signs of life with a push to a fresh local high on the back of Indonesian supply disruption concerns. Gold remains well supported, making another attempt above $3650/oz as it threatens a break of Tuesday’s record high. Friday’s US data calendar is limited to the release of the preliminary UMich sentiment figures. The release has periodically offered significant volatility in recent years, and the inflation expectations subindices could compound the recent build in expectations for Fed easing."

"There are no scheduled Fed speakers, as we are in the communications blackout period ahead of next Wednesday’s rate decision. Markets are currently pricing just over one 25bpt cut for September and a cumulative 70bpts by year-end. Finally, we note that Fitch is scheduled to release its rating update for France, having affirmed a AA– rating in march—with a negative outlook. A credit downgrade may provide additional turbulence for French OATs, however we feel it important to highlight that markets are already pricing considerable credit risk for France as its 10Y yield now trades in tandem with Italy’s."