USD - United States Dollar
US retail sales and the additional Federal Reserve bond-buying efforts strengthened the US dollar in trading yesterday.
US retail sales jumped the most on record in May, albeit from a historically low base, as consumers enjoyed the freedoms of a re-opening economy. The uptick in retail sales was supported by the Fed’s insight into its corporate bond buying program and reports from the White House of a new trillion-dollar infrastructure. The dollar index jumped 0.2%, forcing the Euro back toward 1.1250.
While equity markets rallied amid improving market sentiment, haven currencies were still well bid with both the Japanese yen and Swiss franc holding onto last week’s risk-off gains. The divergence highlights the fragility of the economic recovery.
Attention turned to China and an outbreak in new COVID-19 infections in Beijing. This is the first significant second wave since China began re-opening the economy and suggests a Chinese led recovery may prove out of reach for now.
The pound has remained volatile this week in the lead up to Thursday’s Bank of England meeting. The Bank of England's Monetary Policy Committee, or MPC, is expected to increase current bond buying power by 100bn. The MPC has already used an array of stimulus policy. The UK's interest rate is fixed at 0.1%. It is likely that sterling is currently undervalued and anchored to the downside due to the number of key dates in Britain’s upcoming economic calendar and the number of unresolved, moving parts. To make matters worse, the UK hasn’t seen a positive fundamental data release in a while, most recently unemployment data came in over 100k worse than expected. It seems the pound is holding steady around the $1.26 handle and will likely find a more natural equilibrium once the UK-EU Brexit extension has been granted and the BoE decides what’s best for the UK.
1.351 - 1.358 ▼EUR/USD:
1.121 - 1.129 ▲GBP/USD:
1.1252 - 1.260 ▼USD/AUD:
1.445 - 1.458 ▲