FX Update – July 15 – A Softer USD persists

<h3>EURUSD, H1</h3>
<p>The Dollar has remained on a softening track against most other currencies, while the Euro has remained broadly underpinned amid expectations for EU leaders to green-light the proposed EUR 750 bln recovery fund this week. The Pound managed to rebound after underperforming over the prior two days. Risk appetite has been buoyant, with European and Asia stock markets rallying and US equity index futures gaining, underpinned by news that US biotech company Moderna’s candidate vaccine for the SARS Cov-2 coronavirus was shown in an early-stage trial to be safe while successfully provoking immune responses in all 45 of the volunteers. News from Oxford, UK¹, too, that more progress is being made on the vaccine front also helped lift sentiment and equity markets.</p>
<p>The narrow trade-weighted <strong>USDIndex</strong> carved out a fresh one-month low at <span><strong>95.80</strong></span>, drawing in on the four-and-a-half-month low seen in June at 95.72. <strong><span>EURUSD</span></strong> rallied to its highest level since early March at <span><strong>1.1445</strong></span>. <strong>Cable</strong> rallied to a two-day high at <span><strong>1.2626</strong></span>, extending a strong rebound from Tuesday’s eight-day low at <span>1.2479</span>. The rise in Cable wasn’t just a softer dollar story, as the Pound concurrently rebounded against the Euro, driving <strong>EURGBP</strong> to a <strong><span>0.9051</span></strong> low, extending a correction from yesterday’s two-week high at <span>0.9115</span>. <strong>GBPJPY</strong> also lifted to a two-day high. <strong>USDJPY</strong> drifted under <span><strong>107.00</strong></span>, expecting a moderate correction from yesterday’s one-week high at <span>107.44</span>. The risk-sensitive <strong>AUDJPY</strong> cross printed a five-week high at <span><strong>75.29</strong></span>. <strong>AUDUSD</strong> similarly reached a five-week peak, at <span><strong>0.7020</strong></span>. The BoJ left policy unchanged, as had been widely anticipated. Governor Kuroda maintained dovish guidance, noting that there remain various tools that could be utilized for further easing.</p>
<p>Ahead of the BOC later, <strong>USDCAD</strong> has ebbed to a two-day low at <span><strong>1.3560</strong></span>, weighed down by a combination of the broader US dollar softness and a broadly firmer Canadian currency, which has been concomitant with a bout of risk-on positioning in global markets. Front-month <strong>USOil</strong> futures have rotated higher following a phase of sub-$40 pricing, printing a six-day high at <span><strong>$40.93</strong></span>, which has been supportive of oil-correlating currencies, including the Canadian Dollar. <strong>Gold</strong> continues to wind higher, trading to a four-day high at <span><strong>$1815</strong></span> earlier, before cooling to <span>$1805</span> currently.</p>
<p><a href="https://www.itv.com/news/2020-07-15/positive-news-is-coming-on-oxford-covid-19-vaccine-writes-robert-peston">¹https://www.itv.com/news/2020-07-15/positive-news-is-coming-on-oxford-covid-19-vaccine-writes-robert-peston</a></p>
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<p><strong>Stuart Cowell</strong></p>
<p><strong>Head Market Analyst</strong></p>
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