News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • Asia-Pacific stocks look set to trade higher after US Treasury secretary nominee Janet Yellen showed her support to Biden’s US$ 1.9 trillion fiscal stimulus plan - a boost to energy, industrial and information technology sectors in particular. https://t.co/VSSHeXgtGF
  • The US Dollar may be finding a turning point against ASEAN currencies as smaller fiscal stimulus bets, soft earnings risk and Covid cases translate into some capital flight from equities. Get your #ASEAN currencies market update from @ddubrovskyFX here:https://t.co/F3uz5GHMSd https://t.co/OfexTM6SnX
  • Heads Up:🇺🇸 Joe Biden's Inauguration due at 00:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-01-20
  • Heads Up:🇦🇺 Westpac Consumer Confidence Index (JAN) due at 23:30 GMT (15min) Previous: 112 https://www.dailyfx.com/economic-calendar#2021-01-19
  • 6 out of 9 Dow Jones sectors advanced on Tue, with 56.7% of the index’s constituents closing in the green. Energy (+2.63%), industrials (+1.32%) and information technology (+0.91%) were among the best performers, whereas consumer staples (-0.90%) trailed behind. https://t.co/sC65NvC7Mn
  • Cable noticeably stronger recently, now trading above 1.36 $GBP $USD https://t.co/vJFjg4EClB
  • The New Zealand Dollar has slipped lower in recent days against its major counterparts, as risk appetite notably faded. Key levels to watch for NZD/USD, NZD/JPY and AUD/NZD. Get your $NZD market update from @DanielGMoss here:https://t.co/E0OyTqxvcL https://t.co/An6G3nA6Zg
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/VW5853Ucyk
  • WTI Crude with a strong session, closing just under $53 $WTI $USD https://t.co/94hpJsJeiq
  • #Bitcoin choppy during trade, now comfortably above $36,000 $BTC $USD https://t.co/hKpZxgHFYO
Euro May Turn Lower vs US Dollar as Markets Digest Fed Outlook

Euro May Turn Lower vs US Dollar as Markets Digest Fed Outlook

Ilya Spivak, Head Strategist, APAC

EURO, GOLD, US DOLLAR, FED, INTEREST RATES – Talking Points:

  • Gold struggling, US Dollar showing mixed performance amid market rout
  • Price action may hint markets have almost fully priced in Fed easing bets
  • Euro may reverse from 13-month high as Dollar retains yield advantage

Global financial markets’ response to blistering liquidation at the start of the trading week produced a mostly by-the-book response from global financial markets:

Cycle-sensitive crude oil and stock prices fell amid deepening worries about the economic impact of the coronavirus outbreak, with the former move amplified by the collapse of the OPEC+ output cap scheme. Perennially anti-risk US Treasury bonds and the Japanese Yen rose, the former attracting haven demand and the latter seemingly benefiting from liquidation of JPY-funded carry trades.

Gold, stocks, crude oil, bonds, major currencies amid market selloff

Chart created with TradingView

The responses from gold prices and the US Dollar have been more confounding. The Greenback seems to be of two minds, gaining on commodity-linked FX but falling against the Euro, Yen and Swiss Franc. The yellow metal probed higher – as might have been expected from the archetypal non-interest-bearing asset at a time when yields plunged to record lows – but failed to find follow-through (at least for now).

Indeed, gold’s rise is in the single digits since the start of the year (8.93 percent as of the snapshot below, taken on 10 March 2020 at 7:28 GMT). The bellwether 10-year Treasury note yield has shed over 60 percent while the priced-in 2020 policy outlook implied in Fed Funds futures has recorded a move than seven-fold shift in the dovish direction over the same period.

Gold has struggled to rise even as US yields drop, Fed rate cut bets swell

Chart created with TradingView

That dramatic swell in stimulus bets now reflects expectations now amounts to near-certainty in a further 75-100 basis point reduction in the benchmark lending rate after last week’s surprise 50bps emergency cut. This implies a move to within a hair of the record-low 0-25bps target Fed Funds range, if not an outright return to it. So, markets have already priced in nearly all the conventional easing that could be had.

Markets expect Fed will cut rates to within striking distance of zero in 2020

Source: CME Group

Interestingly, this has left the US Dollar with a narrow yield advantage against its major counterparts. The dramatic shift in the policy outlook has understandably translated into a shrinking rate gap between the US, where rates had been highest among the G10 economies at the start of the current easing cycle. Nevertheless, the front end of the US yield curve still offers a positive return (~58bps) compared to alternatives.

US Dollar has a yield advantage despite dovish Fed policy outlook shift

Chart created with TradingView

This might explain gold’s reticence to some extent. The pace-setting anti-fiat asset is typically animated by the global monetary policy outlook above all, and ubiquity of the US Dollar as a reserve currency means the Fed is the driving force there. If market pricing already reflects as much of a dovish shift as might be reasonably expected, the metal might be finding itself without fuel for gains.

Following on from this could also be a USD recovery against those currencies where it has been suffering a one-sided adjustment in relative yield bets. The Euro is perhaps the most eye-catching among these: it has roared higher, which may be explained by the ECB’s limited room to keep pace with on-coming Fed easing. Its latest target variable – the Deposit Rate – is already in negative territory.

Traits of Successful Traders
Traits of Successful Traders
Recommended by Ilya Spivak
Traits of Successful Traders
Get My Guide

RESOURCES FOR TRADERS

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES