Home Daily Commentaries USD hits fresh highs across most G10 currencies

USD hits fresh highs across most G10 currencies

Daily Currency Update

The Greenback continues to trend higher from last week after Trump announced he would double tariffs on steel and aluminium from Turkey and after investors flee to safe haven currencies like the USD. The USD has made new 52-week highs across most G10 currencies as a result. No release of economic fundamentals today in the US, but the next major data set will be on Wednesday when Retail Sales m/m and Core Retail Sales m/m print.

Key Movers

The Loonie is essentially unchanged from Friday's close. Strong job numbers reported on Friday, but it seems current market uncertainty has kept the CAD on a leash. On the NAFTA negotiation front, Trump continues to threaten Canada with automobile tariffs after he tweeted late Friday evening, "...New President of Mexico has been an absolute gentleman. Canada must wait. Their Tariffs and Trade Barriers are far too high. Will tax cars if we can’t make a deal!" The next set of economic data will release on Thursday as Manufacturing Sales m/m and on Friday with CPI m/m.

The Euro has been dumped this morning after a report in the Financial Times on the economic health of Turkey has investors worried on the likelihood of European lenders struggling to reclaim Turkish loans in the face of the Liras collapse. The article reported that the Eurozone’s chief financial watchdog had raised concerns over EZ lenders exposure to the country whose currency has devalued by around one third over the past year but was not yet “critical”.
Concerns over Turkey’s deficit, inflation and its deteriorating relationship with America see investors flee. Turkish PM, Recep Tayyip Erdogan has been at loggerheads with America since seeing off a coup two years ago during which an American priest, Andrew Brunson was arrested for allegedly “supporting terrorism.”

The Sterling continues to drop this morning amid a series of economic data release that were mainly positive. Trade Balance in June printed at –GBP11380 when expectations were for –GBP11900 while Manufacturing and Industrial Production both printed better than expected at 1.5% y/y and 2.2% y/y respectively.
GDP posted in line with expectations at 0.4% q/q and 1.3% y/y. Brexit risks remain on the forefront as talks continue between the EU and the UK.

The Australian Dollar enjoyed a tumultuous Thursday trading session as it reversed most of the gains earnt earlier in the week. Opening this morning at 0.7373, the Aussie was just another victim of a rampant Greenback which strengthened across the board.

Initially the day started well for the Aussie as trade balance and CPI news from China supported a buoyant AUD. The Aussie not only managed to hold above the 0.74 handle but break to the upside to briefly flirt with the 0.7450 resistance level. This was quickly unwound however, as traders took profit on their positions, making an about-face and going USD positive. There was no single, primary market catalyst that drove the market shift, but the move was certainly exacerbated by bullish comments by the Federal Reserves’ Evans. Evans was indeed particularly bullish on the US economy noting that fundamentals are “extremely strong”.

Wage Price Index (Tuesday), employment and unemployment (Wednesday) numbers to be released next week.

The Reserve Bank of New Zealand (RBNZ) held the official cash rate steady at 1.75 percent yesterday. The RBNZ mentioned that while recent economic growth has moderated, they expect it to pick up pace over the rest of this year and be maintained through 2019. As a result of the bearish comments NZD/USD pair fell almost half a U.S. cent. We now expect the RBNZ to keep rates at this level through 2019 and into Q4 2020, longer than initially projected.

The situation in Turkey has meant USD/NZD has hit another multiyear low dropping to .6580 as investors flee the kiwi. Holders of the local dollar will be hoping there is no more bad news re: US – China/Turkey to unsettle the markets further. GBP/NZD is at 1.9370

Expected Ranges

  • USD/CAD: 1.3132 - 1.3177 ▲
  • EUR/USD: 1.1432 - 1.1536 ▼
  • GBP/USD: 1.2736 - 1.2837 ▼
  • AUD/USD: 0.7281 - 0.7380 ▼
  • NZD/USD: 0.6571 - 0.6622 ▲