ETHICAL CURRENCY DAILY BRIEF

 

 

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Daily Brief - 28/06/2017

Hong Kong Office

 

British Pound

 

FXStreet: GBP/USD is trading at fresh weekly highs, slightly below the 1.2800 handle. The pair has been moving all day with a bullish bias and accumulates a gain of 70 pips so far today. The slide of EUR/GBP limited the upside in cable but the weak US dollar strengthened.

 

Earlier today, the Bank of England presented the Financial Stability Report, showing no surprises. Carney took note of risks from the Brexit negotiations. The presentation had no impact on the pound. Mario Draghi pushed later EUR/GBP to the upside, after he mentioned that the current weakness in inflation is seen as transitory. GBP/USD rose sharply on the back of a decline of the greenback. The USD dollar started to decline during the Asian session and extended losses later. Not even US data helped the greenback. The US dollar index is headed toward the lowest close since October.

 

Janet Yellen did not speak about monetary policy so far today in London, while Patrick Harker, in line with Draghi, signaled that the current subdued inflation is temporary. 

 

US Dollar

 

Reuters: The dollar slid to 10-month lows against the euro on Tuesday after the head of the European Central Bank opened the door to steps that might begin to reduce the central bank's stimulus and after a vote on U.S. healthcare legislation was delayed. The dollar extended losses after U.S. Senate Majority Leader Mitch McConnell delayed a vote on healthcare legislation, hoping to get more support from Republican senators.

 

The euro surged against the greenback to $1.1349, its highest since late August 2016. The dollar eased from a more than one-month high against the Japanese currency of 112.46 yen, touched earlier in the session, and was last just 0.3 percent higher at 112.12 yen. The dollar index, which measures the greenback against a basket of six major rivals, touched a 13-day low of 96.344. The dollar touched a more than seven-month trough against the Swiss franc of 0.9593 franc.

 

"People are losing confidence in the ability of the administration to get anything done," said Jason Leinwand, founder and chief executive of FirstLine FX in Randolph, New Jersey. "It will slowly grind on the dollar." Analysts said much-anticipated comments from Federal Reserve Chair Janet Yellen in London did not greatly impact the dollar. Yellen said she does not believe there will be another financial crisis for at least as long as she lives.

 

Japanese Yen

 

FXStreet: USD/JPY is trading at 112.08, down -0.22% on the day, having posted a daily high at 112.36 and low at 112.07. USD/JPY is turning south, capped at 112.46 overnight highs with markets unsure and mixed post the performance and turbulence in previous sessions. The main events were around Draghi and Yellen speaking with a little bit of vice chairman of the Fed Fischer. 

 

The comments coming from Central Bankers are taking te spotlight this week with a lack of key fundamental calendar. Yellen was less hawkish than expected, and Fischer warned of risk aversion. Draghi gave the euro a massive boost with his rhetoric and thus the dollar was on rocky ground. The yen was driven on the following, shaping its upside in today's open in Tokyo despite a marginally positive open for the Nikkei 225.

 

Global Markets

 

Reuters: Asian shares slumped on Wednesday after Wall Street was knocked hard in the wake of a delay to a U.S. healthcare reform vote, while the euro rallied after European Central Bank President Mario Draghi hinted that the ECB could trim its stimulus this year. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent in early trading, while Japan's Nikkei share average also slipped 0.2 percent. 

 

Crude oil futures dropped, giving back some of their overnight surge. Prices rose nearly 2 percent on the weaker dollar, short-covering and expectations that U.S. crude inventories might decline for a third consecutive week. Brent crude futures fell 0.6 percent to $46.35 per barrel. U.S. crude futures were down 0.9 percent at $43.86.

Daily Brief - 28/06/2017

London Office

 

British Pound

 

Reuters: Sterling hit a two-week low against a broadly stronger euro on Tuesday, a tightening of credit controls offering only brief support given competing interpretations of what it means for future interest rates and growth. The defection of several Monetary Policy Committee officials to the camp supporting a rise in base interest rates has given the pound, battered by another round of political uncertainty after this month's elections, some support in the past week.

 

On the one hand, reinstating the minimum 0.5 percent of risk-weighted assets that banks are asked to hold as a buffer against shocks to consumer finances was a sign of confidence in an economy that has looked to be slowing. But it may also take any unwanted steam out of areas of loan growth that could otherwise be cited as one reason for raising rates, helping policymakers hold off for longer with any hike in the Bank's main borrowing rates.

 

"When you're looking at the buffer, they have increased it, and that is a marginal tightening of monetary conditions, and hence possibly a plus for the pound," said Oanda analyst Craig Erlam. "For now, I think, sterling is stuck in a range between $1.26 and $1.28." Sterling did gain against the dollar - rising 0.4 percent to $1.2774 - but that appeared to be mainly a by-product of the euro's full percentage point gain against the greenback due to comments on monetary policy by European Central Bank chief Mario Draghi. Against the euro, the pound fell 0.6 percent to 88.41 pence, hitting its weakest level in two weeks.

 

US Dollar

 

Reuters: The dollar slid to 10-month lows against the euro on Tuesday after the head of the European Central Bank opened the door to steps that might begin to reduce the central bank's stimulus and after a vote on U.S. healthcare legislation was delayed. But any change in the bank's stance should be gradual, as "considerable" monetary support is still needed and the rebound in inflation will also depend on favourable global financing conditions, he added.

 

"The move today is really being driven by the hawkish pivot from Draghi," said Mazen Issa, senior FX strategist, at TD Securities in New York. He said the euro would likely trade in an elevated range of between $1.10-1.15 in the near-term following Draghi's comments. The dollar extended losses after U.S. Senate Majority Leader Mitch McConnell delayed a vote on healthcare legislation, hoping to get more support from Republican senators. The legislation would advance a repeal of major elements of Obamacare and replace it with a new federal healthcare programme.

 

The euro surged against the greenback to $1.1349, its highest since late August 2016. The dollar eased from a more than one-month high against the Japanese currency of 112.46 yen, touched earlier in the session, and was last just 0.3 percent higher at 112.12 yen. The dollar index, which measures the greenback against a basket of six major rivals, touched a 13-day low of 96.344. The dollar touched a more than seven-month trough against the Swiss franc of 0.9593 franc.

 

Euro

 

Reuters: The euro hit a 10-month high on Wednesday after the European Central Bank chief hinted the days of the ECB's aggressive stimulus are numbered, and as the dollar was pressured after a vote on U.S. healthcare legislation was delayed. The euro edged up 0.1 percent to $1.1345, having hit a high of around $1.1355 earlier on Wednesday, its strongest level since August 2016. The common currency has gained 1.4 percent this week. The euro's rally came after ECB President Mario Draghi said at a conference in Portugal on Tuesday that deflationary forces had been replaced by reflationary ones.

 

But any change in the ECB's stance should be gradual as "considerable" monetary support is still needed and the rebound in inflation will also depend on favourable global financing conditions, he added. Traders said the euro could add to its gains in the near term. "With the hawkish tone of Draghi, we should see European rates moving higher, especially on the 10-year part of the curve, and I think the euro has more room to move higher," said Tareck Horchani, head of sales trading for Asia-Pacific for Saxo Bank Group in Singapore. The euro now faces resistance at $1.14, and could get a further boost if that level is breached, Horchani said.

 

South African Rand

 

Reuters: The rand was weaker in late afternoon trade on Tuesday as the latest employment data presented another grim picture of a stagnating local economy. The rand extended its weakness against the dollar despite a weaker greenback, with the euro gaining 1% to the US currency. Employment levels fell in the first quarter of 2017, though mining and construction both showed increases.

 

Employment decreased by 48,000 jobs in the first quarter compared with the previous quarter, from 9.692-million in December 2016 to 9.644-million in March 2017, Statistics SA’s quarterly employment statistics report showed on Tuesday. The economy is officially in a recession, but the rand has been supported by global factors, including positive emerging-market sentiment and inflows into the local bond market. The greenback weakened ahead of US Federal Reserve chairperson Janet Yellen’s speech later on Tuesday after European Central Bank (ECB) president Mario Draghi painted an upbeat view of the European economy.

 

Sentiment was loaded against the local currency following news reports that Deputy Finance Minister Sfiso Buthelezi had questioned the efficacy of the Reserve Bank’s inflation-targeting policy — in contrast to Finance Minister Malusi Gigaba’s stated support for the Bank’s independence, following the public protector’s recommendation to change the Bank’s mandate. At 3.36pm the rand was at R12.9649 to the dollar from R12.8610, at R14.6449 to the euro from R14.3805 and at R16.5581 to the pound from R16.3618. The euro was at $1.1296 from $1.1181.

Currency Rates

 

 

As of 28-06-17 10:06 am HK time