Overarching Geopolitical themes related to Coronavirus still dominate, but it’s the NZD that performs the best out of G10 currencies overnight.
The NZ Central Bank the RBNZ kept interest rates on hold at 1 per cent, and the accompanying statement interested currency markets greatly. The Governor stating that interest rates were likely to stay on hold for the remainder of 2020. The New Zealand Dollar took this as tonic to move from .6400 against the USD up to .6470.
Comments also that the Coronavirus effects on Asia Pacific economies were likely to dissipate across the medium and longer term, helped the AUD gather some ground. Albeit from very low levels, so there could be caution on the future path of both currencies. Technically both remain in the doldrums.
The USD continues to be the big mover, approaching the key 99.00 level on a trade weighted basis, the DXY index. US equity markets hit fresh highs, in particular the Dow Jones and S&P 500 gathering further momentum. A fresh inflow of USD buyers from “Real Money Funds” to enable Stock purchases is the prevailing theme. How long these levels hold remains the question. Any about turn in investor sentiment could see the Greenback retrace. This in turn could help those with GBPUSD exposures. One theme to keep a keen eye on.
Closer to home in the UK; GBP has had a decent week thus far, much better news for importers with FX exposures. Whilst the moves have not been huge, a continued attritional grind higher away from 1.18 in GBPEUR and 1.29 in GBPUSD have proved welcome relief. The data calendar is thin today and tomorrow, so we could expect post Brexit trade conversations to take the full gamut of attention.
Finally, EURUSD has had a very bearish tone in the first weeks of 2020. Noise coming from some quarters this weakness could be overdone, but for now we await a speech by the Chief economist of the ECB today for further guidance.
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