Morning Commentary: The US Dollar Quietly Rises, Commodity Currencies Quietly Sink

Foreign Exchange - Morning Commentary
The US Dollar Quietly Rises, Commodity Currencies Quietly Sink
Share this story:
Facebook
Twitter
LinkedIn
Email
David Atkinson
David Atkinson
Foreign Exchange Sales Manager
The US dollar is up for the fourth day in a row, albeit fairly mild moves.  Against the big majors it is pretty much flat, but it is up nearly 1% against the more commodity-sensitive currencies like the Australian and New Zealand dollars and the Mexican peso.  Equities around the world are back on the weak foot this morning.  The S&P 500 is notably off more than 2% at the New York open.  US dollar strength in such a risk-off environment makes sense.

Data-wise, Germany’s IFO confidence index improved in line with expectations; however, expectations are muted these days as Europe is debating lockdowns, with one article out today calling Europe’s new restrictions “lockdown lite”, which focuses on individual outbreaks rather than broad measures that most of the world went through at the beginning of this whole thing.

On the US side, this week’s initial jobless claims rose by 4K to 870K, which is a disappointing result compared to market expectations of 840K.  Globally, all economies feel like they are in a start-stop mode like we discussed yesterday.  Today, it is the US’s turn to be the one to disappoint.

Two central banks – the Swiss National Bank (SNB) and Norway’s Norges Bank – met and left rates unchanged as widely expected.  The SNB’s deposit rate and Libor target is -0.75% while the Norges Bank is sticking with a zero target rate.  Both banks continue to emphasize accommodative monetary policy.

Looking at currencies from a slightly broader lens, over the last five business days, we have seen a gradual but persistent decline in the Mexican peso (nearly 8%), Brazilian real (6.4%) and the South African rand (5.7%).  Like I alluded to at the beginning of this commentary, the currencies that seem to be most at risk are those more tied to commodity price action.  This continues to be a barometer of the global economy, with consumer demand still weak overall.

In watching these currencies this week, it dawned on me that I have not had South Africa as a topic for Global Perspectives in years.  Such will be our topic for the video, which comes out tomorrow morning.
If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
TERMS & CONDITIONS  |  PRIVACY STATEMENT
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog

Are tax hikes coming?