In FX – the Buck Still Gets No Respect

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Market Drivers June 24, 2019
Aussie and CAD rally
IFO in line
Nikkei 0.1% Dax -0.40%
UST 10Y 2.036%
Oil $58/bbl
Gold $1406/oz.

Europe and Asia:
EUR GE IFO 97.4 vs. 97.4

North America:
No Data

The dollar failed to make any recovery in Monday morning dealing remaining lower against the majors and lagging badly against the comdollars which were bid for a variety of reasons.

Aussie was higher against the dollar breaking above the .6950 level after RBA Governor Lowe noted that rate cutting mah not be the best policy for central banks if everyone in G-11 pursued the same path resulting in exchange rate parity. Although the RBA is widely expected to cut rates twice this year, Governor Lowe’s comments reflected the sentiment of many central bankers who are loathe to cut rates during times of positive growth leaving them little ammunition to fight the next economic contraction.

Lowe’s comments injected enough uncertainty into the RBA’s path to possibly push Aussie towards .7000 figure as the week proceeds, but unless there is major progress at this week’s G-20 summit between Xi and Trump the short covering rally is likely to run out of gas at those levels.

Meanwhile, the loonie continued strengthening on higher oil price flows as tensions in the Middle East showed no signs of easing. Crude was up above $58/bbl in late Asian session trade before backing off the highs. There is no material data out of Canada until Friday’s GDP report but for now, the loonie shows no signs of exhaustion in its rallies. Still, the 1.3100-1.3200 is a major support point for the pair and unless the conflict in the Gulf sees another military incident, the pair is likely to consolidate and retrace a bit from these levels.

In North America the calendar is barren and flows in FX will likely be driven by bond and equity price action. Momentum indicates that EURUSD could pop the stops at the 1.1400 level especially if US yields can’t rally off the 2.03% base but the price should remain contained as markets await the G-20 drama for further clues to the next big move.

Boris Schlossberg
Managing Director

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