News & Analysis
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After being hit by the double whammy of a strengthening dollar and a collapse in oil markets, the Norwegian krone became the worst performing G10 currency in the year to date.
The dollar selling pressure was stretched to this morning as investors are awaiting the release of the Non-Farm Payrolls. Today’s Non-Farm Payrolls set to show a fall of around 8 million jobs and will be critical to the dollar’s price action.
The ECB delivers on market expectations and steps up the total amount of quantitative easing under PEPP purchases by €600 billion. The rise outperformed the consensus call by at least some €100 billion, bringing along a stronger-than-expected market reaction.
This morning, the euro pared back some of its gains and fell against the greenback for the first time in over a week, ahead of the European Central Bank monetary policy announcement that takes place this afternoon at 12:45 BST.
The dollar continued to drop along with Treasuries yesterday as optimism around economic recovery following the reopening of economies globally improved risk sentiment.
Loonie breaks out of post-Covid range but the sustainability of the rally is faced with a multitude of risks
With social consumption collapsing, unemployment set to increase to levels above 2008-09, and the oil market in a state of tatters, the aggressive coordinated stimulus response from the Bank of Canada and Trudeau administration failed to prompt a recovery in the loonie.
The UK and the EU will start another round of negotiations today to try to reach a trade agreement, but each side has been blaming the other for the lack of progress so far. This morning, the pound continued its rally and saw another swathe of strength in the buildup to the trade talks.
The ECB is widely expected to bring further action in its next policy meeting on June 4th. In the April meeting, the ECB reinforced its readiness to increase the size and flexibility of the €750bn PEPP launched in March.
The main trigger for markets moving out of the greenback and into other currencies comes from improved market confidence, after US President Donald Trump’s threats to China did not strike to the degree that markets had feared earlier last week.
Tensions rose on concern that today’s news conference by US President Donald Trump on new China policies may further escalate tensions between the two nations after Beijing passed a security law curbing rights and freedoms in Hong Kong.