Last Week Forex Recap: Dollar Reigns Supreme Amidst Deteriorating Risk Sentiment.

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USD - POSITIVE
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The Greenback remains firmly on course to register its biggest weekly gain for months due to renewed safe haven demand as the re-emergence of COVID-19 continues to spread faster outside of the US, and especially across Europe where many countries have been forced to tighten restrictions or even revert to partial lockdowns amidst 2nd coronavirus waves.

The Buck has also been bolstered by progress towards stopgap funding to prevent a Government shutdown, with the House and Senate both approving the temporary bill for passage to the final vote stage next Tuesday.


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GBP - POSITIVE
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Cable looks set to test sub-1.2700 bids again compared to peaks almost 3 big figures higher, but this does not really do the Pound justice or tell the full story.

Indeed, Eur/Gbp is closer to its low between 0.9114-0.9220 parameters after a series of more positive/hopeful Brexit vibes, as EU chief negotiator Barnier is said to have muttered in private that he is realistic about clinching a trade deal with the UK.

On top of all that, PM Johnson's 'lockdown-lite' to avoid reverting to a complete shutdown weighed on the Pound in contrast to latest fiscal initiatives rolled out by Chancellor Sunak in an attempt to save the loss of more jobs and cushion the economy through the winter months.


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EURO - NEGATIVE
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The pandemic resurgence is particularly prominent in parts of Europe and the Eurozone in particular to the detriment of the Euro alongside more dovish ECB commentary regarding inflation undershooting target.

This, allied to broad risk aversion and more signs of the economic recovery waning or at least running out of momentum via the prelim services PMIs especially, has compounded Eur/Usd losses from around 1.1872 to circa 1.1615


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AUD & NZD - BOTH NEGATIVE
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The Aussie and Kiwi have not been saved by their more advanced stages of recovery from repeat outbreaks of COVID-19, and aside from the downturn in sentiment dovish RBA and RBNZ policy outlooks have resulted in them both reversing sharply against their US counterpart.

To recap, NAB and Westpac are now looking for a 15 by cut at the October meeting vs CBA joining the no change consensus, while RBA Deputy Governor Debelle has highlighted that easing, longer dated QE and direct intervention to weaken the Aussie are all options on the table, though the latter may not have the desired effect given Aud fundamentals.

Conversely, the RBNZ looks set to unveil a Funding for Lending Programme next (before year end), although has not ruled out further conventional easing or NIRP.

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JPY & CHF - BOTH NEGATIVE EVEN IN RISK-OFF MARKET SENTIMENT
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A holiday-shortened week for the Yen, though still fairly eventful in technical and flow terms if not fundamental as Usd/Jpy skirted 104.00 when Japanese markets were absent on Monday and Tuesday before rebounding sharply and eventually breaching 105.00 where hefty option expiries sat in defence. But we suspect as well that Japanese fund managers are waiting in the wings to diversify into US assets

In similar vein, the Franc (CHF) has fallen victim to the sheer strength of the Buck and is modestly down vs the Euro within 0.9088-0.9295 and 1.0740-1.0821 bands, which will please the SNB that maintained a highly valued assessment of the Chf.


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CAD - NEGATIVE
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Loonie has been tracking the overall market tone and its US peer for the most part rather than crude prices from 1.3172 to 1.3417 most recently.

Xero Capital Markets Ltd. Review