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Currency Market Analysis

May 22, 2020 | Currency Market Analysis

Global Themes

Equity markets are lower around the world as China’s power grab in Hong Kong rocks investor sentiment, particularly in Asia. Beijing is trying to bypass Hong Kong’s legislature to enact new security laws that ban ‘treason, secession, sedition and subversion.’ Citizens of Hong Kong fear this would erode their freedom of speech, assembly, and the press. President Trump said he would respond ‘very strongly’. Shares in Hong Kong fell 5.6%. Currencies turned on a dime as President Trump’s quote hit the tape halting the gains made this week against the dollar.


Markets will get a lot of US data to chew on next week including Consumer Confidence, New Home Sales, Q1 GDP, Weekly Jobless Claims, Durable Goods Orders, Core PCE Price Index, Personal Income and Spending, and the Chicago PMI.


The Euro was trading higher for a fifth-consecutive day Thursday when President Trump’s statement to act ‘very strongly’ in response to China’s actions in Hong Kong was released. Equities and currencies responded immediately from ‘risk-on’ to ‘risk-off.’ The Euro trades half-a-cent lower than yesterday’s close. Next up for the Euro will be Monday’s widely-watched German IFO Index. With the US off Monday for Memorial Day, trading will be lighter and very quiet when London closes around noon ET today.


The British Pound was also having a decent week until yesterday’s Hong Kong headline but has been trading lower against the dollar ever since. The UK reported Retail Sales for April that fell more than had been expected at -18% vs -15%. The economic calendar is pretty light for the UK next week with just Consumer Confidence reported on Thursday.


The Canadian dollar also fell yesterday as markets went risk-off. The currency had been probing post-Covid highs driven by the rally in equities, the surge in oil prices, and a weaker US dollar. This morning Canadian Retail Sales for March were reported as expected, down -15%. The big data release next week will be Canada’s March GDP Friday.

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