[VIDEO] Currency Point: Taking stock and evaluating positioning


After its initial strength on COVID-19 ‘going global’ the USD has weakened in the past two weeks, not surprising considering the stimulus coming from the Fed and Washington.

However, it is still the worlds safe haven currency and that weakness is starting to flatten out. It has been mixed across pairs but in the main it is firmer to the week ending 17 April against the G10.

The EUR/USD is now hovering at $1.0840, GBP/USD at $1.2455 while USD/JPY is fluctuating between ¥107 to ¥109, it’s clearly battling over which currency is ‘safer’.

AUD/USD is fairing significantly than the others and has almost retracted the initial falls as COVID-19 spread. Friday saw the Chinese Q1 GDP figures which contracted for the first time since the Chinese started reporting GDP by quarters. The contraction was heavier than forecasted but the market looked at the better, forward looking indicator industrial production was much better still contracted but it will turn positive in April.

This saw the AUD/USD shooting higher to $0.6384. From bottom to top the pair has appreciated 17% but has eased 1.3% to currently levels. What is interesting is the pair appears to be playing out as a risk indicator, take the pair’s pop on news Gilead has seen encouraging signs in its medical trials of patients suffering from COVID-19.

What is also starting to filter into FX pricing is the possibility of ‘reopening’ economies; Germany, the UK and the US are the most notable ones. Now we know that NY Governor Cuomo has just extending the state’s lockdown for at least another month, with the earliest relaxation being 15 May. However, on the latest conference call with State governors, President Trump outlined the strategy and conditions needed for states to reopen businesses within 4 weeks if certain conditions are met.

In Germany, Chancellor Merkel has begun discussing plans for parts of the country to reopen in the coming months. However, she too has pointed out that she needs to see transmission falling to 1 to 1 (for every person affected they only infect one other person).

The UK government has extended the country’s lockdown for at least another three weeks in an effort to stem the spread. The deputising Foreign Secretary Dominic Raab said current setting had helped to slow the spread of the virus but not yet at a manageable level.

The economics of the situation is also beginning to materialise, this is no more apparent than US weekly initial jobless claims for the week to 11 April where an additional 5.3million where added to the 16.4 million from the weeks before that a total of 21.7m over the past 4 weeks. Continuing claims for the prior week at 12.0m rose from 7.5m previously. Couple this with the Empire State PMI which fell to a record low as well as the Dallas Fed PMIs which collapsed on activity but also the collapse in the oil price.

The conclusion most draw from all this is trade is still been driven by volatility, meaning most are riding intraday even intra-hour momentum. A tend that clearly is likely to be still in place for another 3 weeks at the minimum. However once economies start to reopen suspect volatility will ease and fundamentals will come in.

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Source - database | Page ID - 21617

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