Kantox currency update: US dollar strengthens, euro dips on risk aversion
The US dollar has regained lost ground to approach 11-month highs against a basket of the most traded currencies, with the Chinese yuan and Australian dollar plunging after the US Government announced a plan to apply new tariffs to USD200 billion of Chinese imports
The euro has extended its reversal from Monday’s highs in the vicinity of 1.1800, weighed by risk aversion, while the GBP remains steady, supported by higher hopes that the Bank of England will raise interest rates in August.
EUR/USD retreating from three-week highs at 1.1800. After having peaked at 1.1790, the euro lost steam on Tuesday, weighed by a certain deterioration of the market sentiment and the pair retreated to intra-day lows right below 1.1700. As at London market opening times, the EUR/USD is trading at 1.1735.
GBP/USD support at 1.3200. The sterling’s reversal from 1.3360 highs on Monday was supported at 1.3190, and the pair picked up on Tuesday, fueled by the recovery shown by May’s Gross Domestic Product, that has boosted hopes for an August rate hike and eases concerns about the crisis in the cabinet. As at London market opening times, the GBP/USD is trading at 1.3270.
USD/JPY struggling to surpass 111.00. The dollar advanced on Tuesday to hit a fresh 7-week high at 111.35 although it has been unable to hold at those levels and retreated below 111.00 during the Asian session with the safe-haven yen slightly stronger, on the new episode of the trade rift between EE.UU. and China. As at London market opening times, the USD/JPY is trading at 111.05.
In the Calendar Today
Early this morning the focus will be the speeches of ECB president Draghi and other officials The Bank has announced the end of the QE in December but it discards any possibility of raising interest rates at least until late 2019. In this context, investors will be eager to assess any hawkish pressures within the Bank’s committee, that would have a positive impact on the euro.
In the afternoon, the Bank of Canada is expected to raise interest rates by 25 basis points to 1.5% to ease inflation pressures, as consumer prices recently reached the 2% target level. Since the action has been anticipated by the markets, we expect it to have a moderate impact on CAD volatility.
Somewhat later, the focus will be on BoE Carney’s speech. UK GDP Figures showed yesterday that the economy returned to growth in May, which paves the path for an August rate hike. Any hint in that direction might have a positive impact on the pound.
07:00 GMT BCE: Draghi’s speech
07:30 GMT BCE: Praet’s speech
12:00 GMT BCE: Mersch’s speech
14:00 GMT BoC: Interest Rate Decision
Previous: 1.25% Expected: 1.5%
15:35 GMT BoE: Carney’s speech