High Betas Bouncing Back
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Dollar Down on Friday
The US dollar continued to stagnate over the European morning on Friday. Following last week’s heavy losses, the USD index has spent the week in a block of consolidation just above the 97.11 level. Expectations of further easing from the Fed, as well as the negative impact from the escalating trade war with China, are likely to keep USD pressured in the near term.
EUR Still Capped by 1.1217
EURUSD has benefited from the weakness in USD today, trading in the green over the European morning. Despite the upside over trading so far today, price has yet to close above the 1.1217 level, which has capped price all week. In the near term, expectations of ECB easing continue to weigh on the outlook for EURUSD.
GBP Still At Support
GBPUSD remains muted over the early European session on Friday, despite the weakness in USD. The growing risk of a no-deal Brexit is weighing heavily on GBP sentiment. Price is keeping glued to the 1.2073 support level where the market has stagnated all week.
Risk Recovery Grinds On Slowly
Risk assets have had a quiet end to the week also. Following a solid recovery over the early part of the week, the SPX500 has lost momentum now and is stalling below the 2958.22 resistance, trading 2924.93 last. A wave of fresh central bank easing this week has helped underpin equities following the heavy sell-off on Monday. Incoming US data will be watched over the coming weeks as the market tries to gauge the likelihood of further easing from the Fed, which would help keep equities supported.
Safe Havens Muted
Safe havens have had a mixed end to the week with gold a little softer over the session while JPY has strengthened. XAUUSD trades 1503.51 last, sitting just below the recent highs. Gold exploded to levels not seen since 2010 this week as the rout in equities fuelled a large safe haven inflow. USDJPY trades 105.87 last with price languishing near the recent 105.55 lows.
Oil Bounce Continues
Oil prices have been a little higher today, as crude continues its recovery off the recent 50.80 lows. Price was knocked heavily lower this week as a combination of growing concerns regarding the US/China trade war, as well as the EIA reporting as crude inventories build, weighed on price. The EIA reported that the recent seven-week run of drawdowns has come to an end. This comes at a time when the demand outlook is once again under concerns given the increased tensions between the US and China. Crude trades 52.86 last.
Commodity Currencies Climbing Back
USDCAD has seen a firm pull back from the highs printed earlier in the week above 1.33. USDCAD trades 1.3226 last, with price sitting just above the 1.3207 level for now. The recovery in oil prices, along with subdued USD action, has helped CAD recover somewhat. Later today we have the Canadian unemployment rate which is expected to remain at 5.5% over July.
AUDUSD has continued its recovery on Friday with price trading .6803 last, up from the lows printed around .6676 earlier in the week. The RBA held rates unchanged this week though RBA Governor Lowe said later in the week that further rate cuts could be likely. This is in line with the bank’s quarterly statement on monetary policy in which it cut its growth forecasts and pushed out its inflation horizon.