SMATS FX weekly market report | Tuesday 26 May 2020

USD

The US Dollar sank early last week on the back of some positive risk sentiment. It could not recover thanks to weak US economic updates and rising tensions between the US and China. This week, the biggest driver of the USD will be the second GDP reading after seeing the economy shrink by 4.8% in Q1, expectations are that the GDP revision will show -5.2%. At the end of the week, Fed Chairman Powell will be talking about economic policies in a virtual panel, any talk of negative rates should weigh on the Dollar.

Influences on HKD, SGD & AED

With the Dollar weakening, our exotic currencies are also starting to take a hit. The Singapore Dollar however, has received a much needed lift in the form of positive GDP data on Tuesday morning. They will also be releasing their import and export prices at the end of the week which could have an impact on the intraday rates. The UAE remains quiet and so does the Dirham as it weakens along side the US Dollar. Hong Kong are back to the streets, but China’s military promises to uphold their national sovereignty as protests are expected to continue.

AUD

Despite weak economic updates inside Australia and threats from China on a possible trade tangle, the AUD rallied in a sea of green last week thanks to risk on sentiment and positive vaccine news. On Thursday, the quarterly CAPEX is likely to continue falling as it dropped from -0.4% to -2.8% for Q4 of last year and analysts expect another drop by 1.0% for the first quarter of this year. Aussie Dollar trends will be impacted by any updates on the US-China trade tensions and any Coronavirus updates.

NZD

The New Zealand Dollar topped the forex pile last week thanks to some better-than-expected commentary out of the Reserve Bank of New Zealand and a round of positive global risk sentiment. There are a couple of catalysts for the New Zealand Dollar to keep them at the top of the charts. On Monday, the trade balance came close to doubling expectations when it came in at NZ$1 267M against the forecast of NZ$700M. On Thursday, the ANZ business confidence is expected to improve from -66% to -46% in April.

EUR

Positive risk sentiment drove the Euro to the ground last week and with only a handful of low to mid-tier data expected, the single European currency will be making moves off COVID-19 updates and it should move off counter-currency action. The European Central Bank head, Christine Lagarde, will be giving a response on behalf of the ECB regarding Coronavirus at the European Youth Event 2020. German retail sales are expected to take a 10% hit in April while their preliminary CPI is likely to tick 0.1% higher after gaining 0.4% last month. Finally, the Eurozone headline CPI is expected to come in at 0.4% while the core figure has been forecast to remain at 0.9%.

GBP

It was a mixed-week last week as the GBP was influenced by global risk sentiment, followed by signs of negative rates in the UK and disappointing economic updates. With only the safe havens of the Japanese Yen and Swiss Franc doing worse than the GBP out of the major currencies last week. There are not any catalysts out of the United Kingdom this week but after the announcement that the Bank of England are looking into a negative interest rate policy, traders should keep their ears and eyes out for any updates from the BoE.