The USD falls vs all the major currencies this week except one

USD falls the most vs the NZD

The USD fell versus all the major currencies is weeks with the exception of one…the CHF.
USD falls the most vs the NZD
The US dollar fell the most versus the NZD and AUD as those currencies benefited from risk on sentiment, somewhat improving China and expectations that as Covid spread slows, central banks would start to look toward reversing some of the expansionary policy.
After trading sideways on Monday, the NZDUSD rose on each successive day this week.  The pair has risen 9 of the last 11 trading days.
Versus the AUDUSD, the pair was modestly lower on Monday, before also rising on each successive day this week.
For the USDCHF, last Friday, the pair closed near the low for the week.  After trying to extend lower early in the session on Monday, the pair moved sharply higher. That moment it was reversed on Tuesday before rallying up to the weeks high on Wednesday and moderating lower on Thursday and again today. Overall, the week was full of up and down price action with only an 88 pip trading range.

The short term lid on the US dollar

Comments from Westpac senior currency analyst Sean Callow quoted in a Reuters piece in response to Powell speaking on Thursday (US time).

  • “Shorter-term, Powell just put a lid on the US dollar”
  • “The baseline case is still for a substantial acceleration in the global economy, which historically has proven to be positive for most currencies against the USD, but I think there is potential to at least have a debate over whether us USD will be quite as weak as people expect. “

What’s the trade if Trump steals the election this year?

re we looking at a repeat of the dollar melt up in 2016?

As Biden leads in the polls, almost everyone has been talking up the case for a ‘blue wave’ and what scenarios may take place should that happen.

The straightforward one being “buy everything, sell the dollar” of course, but there are some risks associated with that once the euphoria begins to fade.

Over the past ten months, I grew from thinking Trump would easily win this election to thinking that Biden should have this in the bag, judging by the lead in the polls. But now, I’m less confident of that outcome as we approach the home stretch.
I would still argue that the base case remains for a ‘blue wave’ but Trump winning once again and stealing this election is not within the realms of being unworldly, if you ask me.
As a trader, it’s best to be prepared for all outcomes and eventualities, so what is the trade if we do see another four years of Trump in the White House after next week?
Is it going to be the total opposite of the reaction if we see a ‘blue wave’ outcome?


Why Africa is now the biggest new market for forex trading

Forex trading is on the rise in Africa

In recent years there has been a significant rise in demand for forex trading in Africa, with the majority of the estimated 1.3 million traders in Africa residing in South Africa and Nigeria.

Not only is the number of traders and investors across Africa increasing, but the number of foreign investors is also on the rise, strengthening Africa’s currencies as well as the economy greatly.

With the South African Rand being one of the top 20 most traded currencies in the world at the moment, Africa offers one of the largest markets for forex trading globally.

Some of the world’s largest forex brokers, such as FXTM and HotForex, have become regulated with the Financial Sector Conduct Authority (FSCA) of South Africa, one of the most respected financial authorities in the industry.

With the increase in forex trading in Africa, the FSCA has responded responsibly and enforced a new licensing regime known as the Over the Counter Derivative Provider license (ODP).

The ODP forces all brokers with a local presence to provide transaction data such as price, instrument type, leverage ratios as well as the name and residence of the investor, to the FSCA to ensure safe and legal trading practices.

The FSCA allows these brokers to offer services not only in South Africa, but also to other African countries such as Nigeria, Ghana and Kenya.

The European Securities and Markets Authority (ESMA) enforced new restriction laws on the maximum leverage ratios allowed for European traders, forcing traders to look to other markets.

These new restrictions only allow leverage ratios of 30:1 for major currency pairs, 20:1 for non-major currency pairs and gold, and 2:1 for cryptocurrencies. Leverage ratios as low as these have a massive negative impact on potential profits.

Added to this, the provision of bonuses, promotions and binary options was also banned.

The FSCA allows brokers to offer unlimited leverage ratios, which can potentially maximise funds greatly, and has led to more residents being prompted to start trading the African markets.

Although there are minor restrictions in some African countries to prevent fraudulent activities, there is no complete forex trading ban in Africa, which allows nearly anyone to profit from these ever-growing markets.

Recent lockdown measures as a result of the COVID-19 pandemic and the resulting unemployment have prompted people to explore new opportunities to earn money.

The forex market is easily accessible, holds endless opportunities to make money with little required capital and traded 24 hours, five days a week, allowing people to trade either full-time or part-time.

Where forex trading was always expensive and originally done by large companies and high net-worth investors, it is now more affordable than ever, with some brokers charging no minimum deposits and minimal banking fees.

Another incentive to enter the world of forex trading is the multitude of free tools to ensure success, such as trading courses, demo accounts and webinars that educate beginners on how to trade, use strategies and analyse markets.

Trading is made easy with the internet becoming more accessible across the African continent. All one needs is a smart phone, pc, laptop or tablet, and a good internet connection, to trade from anywhere in Africa and the rest of the world.

Nikkei 225 closes lower by 0.76% at 22,770.36

A down day for Asian stocks

Nikkei 16-07

A poor day for Asian equities as profit-taking activity was the reason most alluded to for the drop after the Nikkei also touched a one-month high yesterday, not to mention the slump in Chinese equities as well.

Tokyo reporting a daily record of 280 new virus cases added to the softer tone in general too. The mood in US futures also isn’t helping, with E-minis seen down 0.4% currently.

The Hang Seng is down 1.1% while the Shanghai Composite is seeing losses of 2.3% now.
In the currencies space, this is seeing the dollar keep mildly firmer but nothing too significant as trading ranges remain relatively modest for the time being.

All eyes on the Fed now

The dollar keeps weaker ahead of the Fed

The greenback isn’t getting much of a reprieve despite a slight pullback in equities during European morning trade, with the dollar still seen weaker across the board.

The franc is a notable gainer, and is posting decent gains of around 1.7% against the greenback so far this week after SNB sight deposits declined for the first time since January – in a sign that the SNB is relaxing a little after months of heavy intervention.
But in any case, all eyes are on the Fed later today with a couple of main points being any indication of yield curve control and how the Fed will assess the current economic situation and what will be their response to that i.e. will they keep the party going?
  • Expects the Fed to clarify its intentions on asset purchases
  • Fed has scaled purchases back as overall functioning has improved
  • Expects the Fed to shift its commitment from daily purchases ($4.5 billion in both Treasuries and agency MBS) to a monthly purchase rate of $80 billion in Treasuries and $60 billion in agency MBS instead
  • Does not expect a change in forward guidance
  • Expects median assessment of monetary policy to include keeping Fed funds rate at zero lower-bound through the end of 2022
Danske Bank
  • Not expecting the Fed to make any significant changes to policy stance
  • Looking for two things i.e. whether or not the Fed will change its forward guidance and changes to asset purchases to a monthly figure
  • Thinks it is too early for Fed to change forward guidance at this stage
  • Fed will make clearer what conditions for tightening policy moving forward
  • Does not think the Fed will gain much by shifting to monthly asset purchase target
  • Does not expect the Fed to implement yield curve control (YCC)
  • US jobs report should keep policymakers more upbeat going into the meeting
  • But it is unlikely to substantially change decisions/forecasts
  • Says that the forward guidance is likely to be paired with a weak form of YCC
  • Commitment mostly to front-end yields to reflect policy path implied by guidance
  • Economic projections should show a median for no rate hikes through 2021
Deutsche Bank
  • Expects the Fed to take its first step away from a crisis prevention back towards the goal of providing accommodative support for the recovery
  • Expects the Fed to announce open-ended QE consistent with monthly purchases of Treasuries of between $65 billion and $85 billion
  • Forward guidance should be enhanced to reaffirm commitment to keep rates low
From the expectations above, it shows that the market is expecting the Fed to dial back some of its earlier commitments i.e. daily asset purchases as they are no longer necessary, considering that market conditions are well maintained for now.
WCRS 10-06

Singapore’s central bank reduces slope of currency band to zero

The Monetary Authority of Singapore adjusts monetary policy for the country through currency control, not via interest rates.

MAS says it will adopt a zero percent per annum rate of appreciation of the policy band starting at the prevailing level of the SGD NEER

  • there will be no change to the width of the policy band.
  • Says this policy decision hence affirms the present level of the S$NEER, as well as the width and zero percent appreciation slope of the policy band going forward
  • core inflation is likely to remain below its historical average in the near and medium term
  • Says MAS’ money market operations will at the same time provide sufficient liquidity to the financial system
  • will continue to be vigilant over developments in the economy and financial markets, and stands ready to curb excessive volatility in the SGD NEER
  • says both MAS core inflation and CPI -all items inflation are expected to average between −1 and 0% in 2020
  • says external sources of inflation are likely to weaken in the near term amid the global downturn
  • resident unemployment rate is expected to rise and wage growth ease
more to come

3 reasons why USD/JPY is heading back down to 105

A note via ING forecasting lower for USD/JPY, to 105 in three months

(1) Japan’s GPIF probably will not pour money into overseas bonds when $/JPY is above 110
(2) the rally to 112 was largely down to USD funding strains, which should reverse into April
(3) Japan’s large current account surplus will see JPY favoured in a recession.
Its a detailed note, but this snippet on point2:
  • Amongst many fire-fighting measures, the Fed and the US Treasury have since re-introduced schemes to support the CP market directly (CPFF & MMLF) and measures to support investment grade corporate issuance (PMCCF and SMCCF)
  • Along with the promise for unlimited QE, the Fed has managed to introduce some calm into money markets
  • We expect even calmer conditions once the Japanese financial year-end has passed (March 31st) and the Fed starts its CPFF program in April. A turn-around in the basis swap should take some upside pressure off USD/JPY. 

BREAKING : The BOJ bought a record amount of ETFs today

The total amounted to ¥101.4 billion, the most since the central bank began to intervene in the stock fund market in December 2010

This comes after BOJ governor Kuroda’s pledge to keep liquidity conditions ample and while they continue to insist that this move is aimed at lowering risk premiums, let’s be real. There’s only one reason why they are doing this.

Senior IOC member says Tokyo Olympics could be cancelled due to coronavirus

Dick Pound said that if it proves too dangerous to hold the Olympics in Tokyo this summer because of the coronavirus outbreak, organizers are more likely to cancel it altogether than to postpone or move it.

Pound is a senior member of the International Olympic Committee
“In and around that time, I’d say folks are going to have to ask: ‘Is this under sufficient control that we can be confident about going to Tokyo or not?'” he said in an exclusive interview with The Associated Press.
Link here for more
Yep, that’d be bad news for Japan indeed.Dick Pound said that if it proves too dangerous to hold the Olympics in Tokyo this summer because of the coronavirus outbreak, organizers are more likely to cancel it altogether than to postpone or move it.
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