Archives of “August 2020” month

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The Australian dollar is the top performer this month

  
Analysis, Forex

AUD/JPY is the best trade this month

The Australian dollar is up another 25 pips today to cap an impressive month.
AUD/USD came into August riding a four-month winning streak and had closed out July with an impressive rally to 0.7200 from 0.7000. It started the month with a sideways move and was down month-to-date as recently as last Monday but it finished the month on a six-day winning streak.
It’s now at the highest since July 2018.
AUD/JPY is the best trade this month
Looking at the chart, there isn’t much standing in the way of a return to 80.00 but don’t expect a continued straight line to the upside.
The yen is the worst performer in August, narrowly trailing USD.

It’s the best August for markets since 1986

  
  Analysis

Records continue to be broken

MSCI world index
European stocks have slipped to end the month but the overall picture in August has been remarkably strong. Generally, August is a soft month for equities but not this year as asset prices everywhere have surged.
The MSCI World Index of developed markets is up 6.6% this year in the largest August rally since 1986. The All-World index that also includes emerging markets is in its best August since records began in 1988.
On the month:
  • S&P 500 +6.8%
  • Stoxx 50 +3.7%
  • FTSE 100 +1.1%
  • CAC 40 +4.1%
  • DAX +5.2%
  • Nikkei +6.6%
  • Hang Seng +2.4%

Dollar slumps into the London fix

  
Analysis, Forex

Dollar at the lows of the day

Dollar at the lows of the day
The dollar is being hit particularly hard at the moment into the London fix. The Dollar Index is at its lowest since 2018.
The lone bright spot for the dollar today is against the yen but other wise it’s a miserable day.
Year-to-date, the Canadian dollar is now the only major currency that isn’t in positive territory vs USD and it’s not far from flipping.
FX 2020 performance
London is closed today but there’s still plenty of international benchmarking into the fix and it’s going into a thinner-than-usual market today.

EUR/USD: To 1.25, USD/JPY: to 100 in the next year – SocGen

  
Analysis, Forex

New forecasts from Societe General

New forecasts from Societe General
Societe Generale Research updated its FX forecasts and now targets EUR/USD and USD/JPY at 1.18 and 105 respectively by end-2020 and at 1.25 and 100 by end-2021. “Our updated forecasts reflect our concern that EUR/USD in particular, has gone too far too fast, but it seems clear to us that we are at the start of a multi-year period of dollar decline, from very elevated levels,” SocGen notes.

“The yen still can’t fall far and is doing its job: ready to rally if global equities correct, doing little while they go up…A sterling short squeeze has dragged EUR/GBP below 0.90 but we doubt it can hold here for long, even if the outlook is still for the real trade-weighted index to bump along the bottom,” SocGen adds.

EUR/USD at the crossroads

  
Analysis, Forex

A look at EUR/USD and what comes next

CMS
With much of Europe and the United States reeling from Covid-19, one beneficiary has been the euro, having risen to yearly highs vs the dollar this month.

After bottoming out in mid-March, the currency pair has seen its fortunes reverse, striking fresh yearly highs as investors flock behind the euro.

There are a few different factors in play however, all resulting in a net positive for the EUR/USD looking ahead.

Key points to watch

The recent gridlock in the United States’ Congress has eroded confidence in the US dollar. This has led to an all-out siege against the greenback, with the euro and gold scoring advances.

Partisan bickering between Republicans and Democrats shows no sign of abating anytime soon, with a fresh stimulus bill as elusive as ever. With key economic safety nets in danger of lapsing, the US economy is appearing more fragile than ever, which bodes poorly for the US dollar in H2 2020.

Conversely, Europe’s recent stimulus package has proved to be a dose of stability investors were looking for. Consequently, the EUR/USD has touched fresh highs and remains bullish.

Covid-19 continues to play a role in both Europe and the US, though the scale of the pandemic could not be more different between the two continents. Whereas the US has seen the death toll soar past 160k with upwards of 60k new cases per day, Europe has seen witnessed a fraction of this.

Internal strife and doubts over Donald Trump’s handling of the pandemic will continue to hamper any US dollar rally in the near-term. With an election scheduled in under 3 months, there is the potential for a wide range of factors, so this is one area to watch.

Finally, any dollar bulls will need to dial back expectations in H2 2020 after a recent tranche of economic data. The latest US unemployment data is further casting doubt on a V-shaped recovery, once touted by White House administration officials.

Few, if any experts now full expect a quick rebound in the US economy as Covid-19 continues to linger. A looming battle this fall surrounding school openings could also serve as an additional harbinger, with shuttered institutions doing little to promote economic growth. (more…)

Has the dollar lost its grip on the iron throne?

  
  Analysis
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What is next for the dollar?

FXTM
If one could describe the Dollar’s performance over the past few months in one word, the best fit would be vulnerable.

The once king of the FX space has weakened considerably in Q3, depreciating against every single G10, most Asian and emerging market currencies. This is despite its safe-haven status and the global reserve currency title. For those who are wondering why the Greenback remains depressed and unable to shake away the blues despite the general uncertainty, the first clues can be found in the US economy. (more…)

Dollar faces an uphill battle from here – Pimco

  
  Analysis

Pimco says that moving forward, the dollar is likely to fall in all but the most extreme cyclical scenarios

Dollar

The investment firm says that the dollar is facing an “uphill battle” to find support as the Fed’s accommodative monetary policy depresses yields:

“We believe an unprecedented degree of fiscal support, the Fed’s expected commitment to make up for past inflation target overshoots, and the US’ uneven recovery are likely to impart a depreciation bias to the dollar in all but the most extreme cyclical scenarios.”

Adding that the speed in which a successful coronavirus vaccine will also have some bearing on how fast the dollar may sink from here onwards.
The firm also says that as the dollar wanes, the currencies that are likely to gain against the greenback are the euro (due to ECB’s PEPP and recovery fund), aussie, loonie, Norwegian krona, Chinese yuan, and Korean won (improving risk appetite).
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