Daily Currency Update

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Dollar finishing off the week on top

USD - United States Dollar

Volatility continued to push the US dollar higher against the euro and Great British pound. Both currencies, along with the Australian and Canadian dollars, saw swings up and down overnight before driving demand for the USD higher.

The demand for the US dollar increased despite news this morning that US durable goods orders didn’t meet forecasted expectations. Durable goods orders rose 0.4% in August. Orders were expected to increase 1%.

The market didn’t respond in a negative manner. None of us should be surprised at this point that watchers are monitoring ongoing discussions about a US Federal stimulus package and coronavirus outbreaks around the globe.

Key Movers

EURUSD dropped as the German IFO business climate index came in worse than expected. There are concerns around the health of the European economy. Second wave fears continued to spread. European Central Bank President Christine Lagarde and the ECB are monitoring various elements of the economy very closely and are not afraid to intervene should they deem it necessary. Brexit negotiations will continue to weigh on both the pound and euro until an agreement is reached.

GBP found itself slipping once again on Thursday, as a combination of Rishi Sunak and the Bank of England left GBPUSD trading above the $1.27 handle. Sunak announced that the government will be helping viable businesses with their employee wages, if they work over 33% of their normal working hours. This will certainly act as a safety net for Britain, but many worry for the sake of small business owners and sole traders during this time. It is likely the government will experience a surge in total unemployment all together after the furlough scheme ends in October, leaving a higher economic burden due to the number of people applying for Universal Credit.

Despite improved risk sentiment and an uptick across risk assets, the Australian dollar continued to give up ground to most major counterparts through trade on Thursday, drifting lower and testing key supports. The AUD broke below 0.7080 and drifted toward intraday lows at 0.7020 before edging higher overnight. The AUD remains vulnerable to further corrections in risk sentiment as markets re-assess expectations for global growth amid the uncertainty of a second Coronavirus wave. Sentiment continues to drive direction as markets largely ignore underlying fundamentals, opening the door to increased volatility in the weeks and months leading into the US presidential election. Should market appetite for risk continue to sour, the AUD could test psychological supports at 0.70 and find itself trading between 0.68 and 0.70 US cents through the short-term.

Expected Ranges

EUR/USD: 1.161 - 1.169 ▲

GBP/USD: 1.269 - 1.279 ▲

USD/CAD: 1.333 - 1.341 ▲