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Currency Market Analysis

Jun 24, 2020 | Currency Market Analysis

Global Themes

FX markets turn volatile on trade uncertainty

FX markets experienced a roller-coaster ride yesterday as markets plunged on fears the US-China trade deal had been cancelled before a clarification pushed Asian markets higher.

Initially, news that US trade advisor Peter Navarro had told Fox News that the US-China trade deal was “over” sparked panic, but both Navarro and US president Donald Trump later clarified, with Trump saying the deal was “fully intact”.

However, tensions remain, with China’s Global Times, often seen as a mouthpiece for Chinese government policy, said Navarro’s comments had “cast suspicion on the trade deal with his reckless and contradictory attitude”.

US-China relations remain likely to be a key driver of global sentiment as we head towards November’s US presidential elections.

PMI

The euro was helped by broadly better PMI numbers yesterday.

These numbers provide the most timely reading of global economic health with better news from Europe and the UK boosting sentiment.

The US was broadly steady but Japan disappointed.

RBNZ

The next major event comes from the Reserve Bank of New Zealand.

After extending its money-printing program at the last meeting, no substantial change is expected.

However, the NZDUSD, up an incredible 17% versus the US dollar since mid-March, might be a major factor for the RBNZ.

RBNZ governor Adrian Orr has previously said that a lower the NZD is one key way of transmitting looser monetary policy. The rapid rise might have created headaches for the central bank.


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