Monex: EUR/USD maakt pas op de plaats na aantikken tweejarig hoogtepunt, dollar blijft onder druk staan

6 augustus 2020

Hieronder volgt een kort commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

EUR

The euro briefly spiked to a two-year high against the dollar this morning as fiscal stimulus uncertainty and Sino-American tensions remain in play for the greenback. The pair failed to hold onto the break for long, but the increased uncertainty around the dollar and yesterday’s US data gives reason to believe in a more sustainable rally. In Germany, factory orders surprised to the upside and printed at a whopping 27.9% in June, well above the forecasted median of 10.1% and even beat the highest forecast of 20%. This shows the recovery gained traction in June, and with the economy gradually reopening again, further gains in production are likely in the coming months if new virus cases are kept in control. In the past 24 hours, however, Germany recorded 1,285 new cases, the highest number of new cases in more than three months which brings the total to 214,113.

USD

The dollar sank back to 2018 lows as measured by both the DXY and Bloomberg dollar composite indices. Covid data continues to way on the greenback as yesterday saw the second deadliest day in California, while Florida’s cases exceeded 500,000. While new cases are moderating somewhat in states like California, Texas saw a stark rise in its number of new cases, reporting 11,543 yesterday. Meanwhile, hotspot Florida saw a 1.1% increase in the past day as the number of new cases rose by 5,409. Meanwhile, stimulus talks in the US are reported to have hit an impasse, with both sides still far apart on major issues. Previous comments by Secretary Mnuchin about a deal being struck by the end of the week seems distant as both sides can’t agree on a general outline to a deal, leading Donald Trump to explore ways in which to unilaterally extend jobless aid. Reports from the Wall Street Journal suggests Republican leaders are prepared to walk away from the table and rely on executive decisions made by President Trump if a deal isn’t reached by the end of the week. A move that may bring more flexibility to the Democrats demands. This morning, the dollar has found support in the G10 space, but if yesterday’s session was anything to go by, the dollar’s fortunes this afternoon may be different.

GBP

Sterling is trading up against both the dollar and euro this morning after the Bank of England kept all policy settings unchanged in a unanimous decision. The MPC’s thinking about the UK economy can be characterised as being cautiously optimistic about the immediate future, but increasingly wary about medium-term growth prospects and uncertainty. The Committee seemed encouraged by the pickup in consumption and the housing market since lockdown measures were eased, and as such, there seemed to be little appetite for further easing in the immediate future. However, forecasts for 2021 were solidly downgraded, due to the MPC now assuming a greater degree of “scarring” to consumer behaviour and productivity. The central forecast sees GDP regaining its pre-crisis peak by the end of next year, and inflation rising above target after two years. Risks were clearly judged to the downside of this outlook, and with the high amount of uncertainty presented by the covid-19 pandemic, medium-term inflation forecasts will not be a primary driver for policy. Negative rates got a four page “box” in the MPR - this is not something the MPC would do if the measure was not under serious consideration. However, concerns about the transmission mechanisms of the policy mean that at this stage it’s looking like a last resort measure for the event that the UK experiences another major economic slowdown. For now, the MPC seems encouraged by high-frequency data suggesting consumer spending and the housing market are recovering rapidly. In the event of a downturn, an acceleration in QE is likely to be the first port of call, with negative rates only considered if this measure does not provide enough additional stimulus if needed. Elsewhere, Scotland’s government reimposed lockdown measures in the city of Aberdeen yesterday after a spike in local cases. Restrictions were not only imposed on travel and indoor gatherings but on indoor and outdoor hospitality too - an area of the economy hardest hit by the first wave of national lockdown measures.