Speculators have cut their net long dollar position to a two-month low, but this is not necessarily evidence of a more fundamental souring of sentiment toward the greenback. At least not yet. While the ebbing of U.S. rate hike expectations recently has eroded the dollar’s rate appeal, none of its G4 rivals are glowing alternatives. The Federal Reserve is still expected to outgun its peers when it comes to raising interest rates. Indeed, funds scaling back their bullish bets on the dollar may be simply taking profit, clearing the decks, ...

Sterling fell on Tuesday against a strengthening U.S. dollar but jumped against the euro in July thinned trade with markets watching for any sign from the Bank of England on its monetary policy path. With some liquidity expected to return to the foreign exchange market later in the day after a U.S. long bank holiday, the pound fell 0.4% against the dollar to $1.2051, marching towards a two-week low of $1.1976 hit on Friday. Against a weakening euro, sterling rose 0.6% to 85.47 pence, its highest level since June 17. ...

USD: Battered risk currencies could receive a reprieve Liquidity is returning to FX markets after Monday’s US public holiday. The US data calendar is pretty light today and the next big input will be tomorrow night’s release of the June FOMC minutes, where we will hear more about the rationale behind the 75bp hike. That is probably a dollar-positive event risk. Before then, FX markets have a little positive news to digest this morning. Reports out yesterday suggest that President Biden could be announcing the roll-back of some US tariffs ...

Concerns about a possible U.S. recession are prompting some fund managers to rotate back into the big tech and growth winners of the last decade in the hope that they can better weather an economic storm. Many stalwarts like Microsoft Corp MSFT.O, Apple APPL.O and Google-parent Alphabet Inc GOOGL.O have suffered declines on par with or exceeding those in broader stock indexes this year, as jumbo rate hikes delivered by an inflation-fighting Federal Reserve hit the tech and growth names that led markets in previous years. Since growth companies tend ...

USD: Counting on a rather solid floor July has historically been considered a low-volatility month in global markets: this year, this notion may fall quite far from reality. Even if global equities have mostly embedded the new inflation-focused approach by the Fed and other major central banks, the depth of the upcoming global slowdown remains highly uncertain, leaving risk assets in a rather fragile state for now. Stock and bond market volatility is set to continue generating material volatility in the FX market, in our view. It is therefore quite ...

The weaponisation of foreign currency holdings by Western governments which froze Russian assets after Moscow invaded Ukraine doesn’t seem to have spooked reserve managers for now. Many may even lift U.S. dollar holdings. The latest numbers from the International Monetary Fund on Thursday showed the dollar’s share of the more than $12.5 trillion world currency reserves was unchanged at 58.8% in the first quarter – even after the invasion and retaliatory financial sanctions on Moscow in late February. That may disguise a marginal 1-2% decline in its actual share when ...

The euro flattened on Monday, staying near a five-year low against the U.S. dollar, as investors sought safety in the greenback amid worries about slowing global growth. The war in Ukraine and its economic fallout, in particular soaring food and energy inflation, has been a major drag on the euro, which has weakened more than 8% against the dollar this year. The difference between the European Central Bank and the U.S. Federal Reserve response to higher inflation has also weighed on the euro. Data on Friday showed euro zone inflation ...

USD: Still in demand The first six months of 2022 have been marked by the dominance of the dollar, with all G10 currencies scoring losses ranging from 2% (the Canadian dollar is the second best-performing currency) to 15% (Japanese yen). As we enter the second half of the year, we must ask ourselves in which way the drivers behind the dollar rally in 2022 – primarily the aggressive Fed tightening and an adverse risk environment – will play out in the remainder of the year. Our view remains that the ...

The U.S. dollar’s share of currency reserves reported to the International Monetary Fund was 58.8% in the first quarter, unchanged from that of the last three months of 2021, IMF data showed on Thursday. The greenback remains the largest-held currency reserve by global central banks. The euro’s share, however, slipped to 20% in the first quarter from 20.6% in the previous three months. In 2009, the euro hit its highest share at 28%. Global reserves, which are reported in U.S. dollars, are assets of central banks held in different currencies ...

Gathering gloom about prospects for the global economy lifted the safe-haven dollar on Friday and pressured risk-sensitive currencies, with the Australian dollar tumbling to a two-year low. Rampant inflation and a rush by central banks to raise rates and stem the flow of cheap money has fuelled sell-offs across markets and lifted assets seen as safer bets. Fresh data on Friday showed euro zone inflation hit another record high in June, while separate statistics showed manufacturing production in the bloc fell for the first time in two years. The dollar ...

Asian currencies will wallow in the near-term, analysts forecast this week, with any respite from their first-half losses only likely to come in the form of proactive policy normalization by regional central banks combined with a Chinese recovery. A mix of elevated commodity prices and narrowing interest rate differentials have piled pressure on most Asian currencies, with some hitting multi-year lows in recent weeks. Foreign money has flowed out of emerging Asia, excluding China, for five months in a row in the face of a reluctance among central banks to ...

The European Union on Thursday will seek agreement on ground-breaking rules for regulating crypto assets as the rout in bitcoin piles pressure on authorities to rein in the sector. Globally, crypto assets are largely unregulated, with national operators in the EU only required to show controls for combating money laundering. A deal would put the EU ahead of the global regulatory pack by giving issuers of crypto assets and providers of related services a “passport” to serve clients across the EU from a single base, while meeting added capital and ...

USD: Market prices a peak in dollar rates around year-end The dollar remains close to the highs of the year as recessionary fears fail to dent the central assumption that inflation is a problem and that the Federal Reserve is laser-focused on taking rates higher to address it. That seemed to be the central message coming from the European Central Bank’s Sintra panel in Portugal, where central bank governors effectively concluded that the low inflation regime was a thing of the past. The current narrative, therefore, means that the Fed ...

The Swedish crown rose on Thursday against the euro after Sweden’s central bank hiked its benchmark interest rate by 50 basis points as expected. In the meantime, the euro flattened against most peers, remaining close to a fresh 2015-low versus the Swiss franc and near a two-week low against the U.S. dollar, amid safe-haven demand on renewed worries about higher rates and a global recession. The Swedish crown was up 0.1% against the euro at 10.6810 at 0830 GMT after briefly jumping 0.4% against the euro to 10.6410 following Sweden’s ...

USD: Temporary calm FX markets have entered a period of temporary calm and ranges have been quite subdued this week. Half year-end may have had some bearing on the matter and yet it would not be a surprise to see some moves developing around key fixings today – especially the WMR fix at 17CET. One might have thought these conditions would lead to lower levels of implied or expected volatility – perhaps on the notion of FX markets finding new equilibrium levels. But no, EUR/USD one-month volatility is still bid ...