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Dollar Loses Gains as Trump’s Twitter Barrage Creates Volatility By Investing.com

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© Reuters.

By Peter Nurse

Investing.com – The dollar handed back early gains in European trade Wednesday, as President Donald Trump’s twitter barrage created volatility.

At 3:15 AM ET (0715 GMT), the , which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.737, while rose 0.1% to 105.78.

Elsewhere, rose 0.3% to 1.2919, while the risk-sensitive climbed 0.5% to 0.7140.

Trump’s decision, announced via Twitter, to call off stimulus talks until after the Nov. 3 presidential election increased downside risks for an already shaky U.S. economy, with the Covid-19 virus still running rampant through many states, and consequently boosted the dollar as traders deserted more risky currencies.

“This is a curious decision. Dragging out the talks but reaching no satisfactory conclusion, President Trump could at least have claimed that the fault lay with the opposition,” said ING’s Robert Carnell, in a research note.

“By unilaterally pulling the plug, at a time when many states are finding their ability to finance supplemental unemployment insurance challenged by lack of funds, this seems to be a gamble with a low probability of paying off.”

Subsequent tweets from Trump during Asian hours on Wednesday, calling for support for airlines and the Paycheck Protection Program, suggested that he may have had at least a partial change of heart, and this has changed sentiment.

Federal Reserve Chairman Jerome Powell had warned on Tuesday of the dire consequences for the U.S. economy if the coronavirus was not effectively controlled, calling for more economic assistance.

The minutes from the U.S. central bank’s most recent meeting, due later in the session, are now firmly into focus, while several Fed speakers are also due to speak. If fiscal stimulus is slow in coming, central banks are going to be placed under even more pressure to add monetary largesse to try and boost their respective economies.

German fell 0.2% in August, a much weaker result than the 1.5% gain expected,  yet rose 0.2% to 1.1753.

“At face value, today’s industrial production data is a disappointment. After two strong months in May and June, German industry is clearly struggling to gain further momentum,” said ING’s Carsten Brzeski, in a research note. “However, even if industrial production remains unchanged in September, the quarterly growth rate would still be around 10%.”

Also of note, Poland’s central bank holds its next rate-setting meeting later Wednesday, and all 24 economists by surveyed by Bloomberg predict benchmark borrowing costs will be left at a record-low 0.1%.

Record new cases of Covid-19 are reigniting concerns about Poland’s economic outlook and strengthening the case to keep interest rates near zero.





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GBP/USD Extends Gains, Brexit Talks to Resume

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GBP/USD Price Analysis & News

  • Brexit Talks Set to Resume
  • GBP/USD Extends Gains to Session Highs

Brexit Talks Set to Resume GBP/USD Extends Gains

Brexit talks are set to resume, a headline that shouldn’t be a surprise to many given the renewed optimism, but enough to give the Pound an added push towards session highs. The source report also noted that the aim is for a deal by mid-November with confirmation of the decision to restart talks expected within the next 24hours. Keep in mind however, that mid-November had been previously highlighted as a new Brexit deadline date if talks were to continue. Alongside this, EU’s Barnier and UK’s Frost are due to speak for the third time in as many days, where we may receive further clarity on the latest reports.

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That said, the Pound had been notably firmer prior to the reports after EU’s Barnier noted that compromise is needed on both sides to reach a deal, which marked a slight change in message from last week, where the EU emphasised that the UK needed to compromise.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -16% 26% 7%
Weekly -6% 27% 13%

GBP/USD 1-Minute Chart: Daily Time Frame

Brexit Latest: GBP/USD Extends Gains, Brexit Talks to Resume

Source: IG

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USDJPY Price Hits a One-Month Low as the US Dollar Continues to Crumble

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USDJPY Price, News and Analysis:

  • US dollar basket below 93.00.
  • USDJPY heads lower as support breaks.
  • IG client sentiment is mixed.

The US dollar continues to leak lower and the dollar basket (DXY) is now below a noted short-term support level around 93.00. The main driver of the move – as we mentioned here at the weekend – is the ongoing US stimulus bill discussion. Tuesday’s more positive tone for an agreement has weighed further on the US dollar and taken it through its short-term support. The DXY is looking oversold currently, so a small short-term rebound cannot be ruled out.

US Dollar (DXY) Daily Price Chart (February – October 21, 2020)

USDJPY Price Hits a One-Month Low as the US Dollar Continues to Crumble

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The Japanese Yen has pulled in a small bid today as well, exacerbating the move lower. A look at CHFJPY shows the recent run higher has stopped and turned lower today, suggesting that the Japanese Yen is today’s preferred safety play. USDJPY today touched a low of 104.87, a new one-month low and if sentiment remains negative, two recent swing-lows between 104.00 and 104.19 come into play. The CCI indicator suggests the market is oversold but not at recent extreme levels.

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USDJPY Daily Price Chart (April – October 21, 2020)

USDJPY Price Hits a One-Month Low as the US Dollar Continues to Crumble



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -5% -13% -8%
Weekly -7% -21% -13%

IG client data show 57.00% of traders are net-long with the ratio of traders long to short at 1.33 to 1.The number of traders net-long is 6.50% lower than yesterday and 8.93% lower from last week, while the number of traders net-short is 1.14% lower than yesterday and 8.98% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY trading bias.

What is your view on the Japanese Yen – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.





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Biden risk looms for Turkey’s Erdogan and beleaguered lira By Reuters

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2/2
© Reuters. FILE PHOTO: U.S. VP Biden meets with Turkey’s President Erdogan in Istanbul

2/2

By Jonathan Spicer

ISTANBUL (Reuters) – Turkey stands to lose more than most other countries if Joe Biden is elected president since he is expected to toughen the U.S. stance against President Tayyip Erdogan’s foreign military interventions and closer cooperation with Russia.

Investors and analysts say the beleaguered Turkish lira is especially vulnerable if a Biden White House pulls the trigger on long-threatened sanctions over Ankara’s purchase of Russian S-400 missiles, which Washington says compromise NATO defences.

An apparent S-400s test last week prompted a furious response from the State Department and Pentagon. Top Republican and Democratic U.S. senators also called for sanctions that could hobble a Turkish economy hit by two slumps in as many years.

Erdogan has downplayed possible fallout and promised counter-sanctions.

The American threats have rung hollow since Moscow shipped the weapons to Ankara in mid-2019, largely because President Donald Trump has resisted punishing Erdogan, with whom he has regular calls, saying he hopes talks will resolve the issue.

Erdogan has leveraged his warm ties with Trump to flex military muscle in Syria, Libya, the Eastern Mediterranean and this month in Nagorno-Karabakh, filling some gaps left by a U.S. retreat from the region in recent years.

But the relationship could cool if Biden, the Democratic candidate and front-runner, wins the November 4 election.

In remarks that drew sharp criticism from Ankara, Biden in December advocated a new approach to the “autocrat” Erdogan and fretted over close Turkish cooperation with Russia.

Biden has said little specifically about the issue recently and his campaign did not respond to a request to comment. His platform calls on “all NATO nations to recommit to their responsibilities as members of a democratic alliance.”

The lira, down 24% this year to all-time lows, already partly reflects the Biden risk, investors say. Any decisive rebound in Turkish assets may be delayed until after the vote when the White House decides whether, and perhaps how, to sanction Turkey.

“A Biden victory would certainly increase the risk of U.S. sanctions … and of course you’ll have anxiety returning to an already unstable financial market that has been hit by the pandemic,” said Roger Kelly, lead regional economist at the European Bank for Reconstruction and Development.

The lira’s slide is due mostly to depleted FX reserves at the central bank, double-digit inflation and what Moody’s (NYSE:) says is a balance-of-payments risk.

Yet the U.S. election has loomed in the background: the latest currency selloff began in July, when Biden’s near 10-point lead in polls solidified. A Turkish government spokesperson did not immediately respond to a request for comment.

For a graphic on Emerging market currencies split by U.S. election risk:

https://fingfx.thomsonreuters.com/gfx/mkt/dgkpljmelpb/Pasted%20image%201602583295562.png

Some investors say now that $13.5 billion has been pulled from Turkish bonds and stocks this year there’s good reason to invest, especially after the central bank began hiking its key interest rate, which is expected to hit 12% on Thursday.

But sanctions over S-400s, now back on the radar, are making some optimists think twice.

“There’s justification for owning Turkish hard currency paper. You may have to navigate through some choppiness but … quite a bit of bad news is already priced in,” said Blaise Antin, head of EM sovereign research at Los Angeles-based TCW.

“Yet the Erdogan back channel to the White House will very likely be much weaker” under Biden, he added. “Erdogan is a pragmatic guy. I expect he would try some sort of pivot.”

NEW U.S. APPROACH

Turkey’s Presidential Spokesman Ibrahim Kalin said this month it would work with any U.S. president yet press him to abandon support for Kurdish militant groups in Syria, and to extradite U.S.-based Muslim cleric Fethullah Gulen who it says orchestrated a failed coup in 2016.

Finance Minister Berat Albayrak has downplayed the fall in the lira, which is near 8 versus the dollar, and he expects Turkey’s economy to avoid a contraction this year.

For a graphic on Timeline of Turkish lira’s gradual decline:

https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjjnyqvr/Lira%20timeline%20US%20elections.PNG

Foreign holdings of Turkish government debt have fallen to 3% from more than 25% five years ago. Flows briefly reversed after last month’s surprise rate hike, but the rally was cut short by reports of the planned S-400 test.

A U.S. House defence spending bill worth hundreds of billions of dollars includes sanctions on Turkey under the Countering America’s Adversaries Through Sanctions Act (CAATSA) that is meant to punish countries dealing with Russia.

The Senate could pass it and send it to the White House as soon as December, setting the stage for Biden or Trump to select mild or harsh sanctions next year. Separately last year, Washington suspended Ankara’s involvement in an F-35 programme.

Erdogan sees Turkey’s NATO membership and its opposition to Russia in conflicts in both Syria and Libya as a check on what any U.S. Administration might do, said Nikolay Markov, senior economist at Pictet Asset Management.

“The U.S. will need to rely on Turkey as the main ally in that region, so that puts a cap on sanctions they can take against Turkey,” he said.

(For a lira timeline, click here: https://tmsnrt.rs/3dR1RCY)





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