The USD is broadly stronger for the second day running, with the Bloomberg DXY up just over 0.3%.
Looking past the day-to-day volatility, after falling sharply earlier this year, the USD looks to have settled into a range for now.
Surprisingly, the Japanese yen and Swiss Franc – both noted “safe haven” currencies – are weaker over the past 24 hours, despite the meltdown in US equities towards the close of trading yesterday. The yen is down almost 1% over the past 24 hours, an indication that recent equity turbulence hasn’t been reflective of a broader risk-off move across asset classes. FX implied volatility for the major currencies also remain at reasonably contained levels, in contrast to the recent spike in the VIX.
The GBP received a boost in the Asian session yesterday after a report in the Times (of London) that the UK was going to propose new plans “imminently” for dealing with the thorny issue of the Irish border (no specific details given). To the extent the proposal is acceptable to the EU and the Conservative’s Northern Irish coalition partner, this would help pave the way for a legally binding transitional agreement. The GBP is down against the USD but up against most of the other G10 currencies.
There wasn’t much in the way of US-China trade headlines overnight, but in terms of NAFTA, U.S. Trade Representative Robert Lighthizer said I’m optimistic we can get something done in principle in the next little bit.” On the back of this, the Mexican peso strengthened against the USD overnight (the only major currency to do so) while the Canadian dollar has outperformed the rest of G10 FX.
Against a backdrop of a stronger USD, the NZD has fallen from around 0.7275 this time yesterday to just above 0.72 now. The NZD/AUD has also retreated from its recent highs and now sits just above 0.94. The ANZ Business Survey yesterday was little changed from the previous month and didn’t move markets.
In the day ahead, UK and Canadian GDP is released, but the highlight will likely be the release of the US core PCE deflator (consensus expects a small rise in the YoY reading).
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