Disclaimer

Our systems have detected that you are using a computer with an IP address located in the USA.
If you are currently not located in the USA, please click “Continue” in order to access our Website.

Local restrictions - provision of cross-border services

Swissquote Bank Ltd (“Swissquote”) is a bank licensed in Switzerland under the supervision of the Swiss Financial Market Supervisory Authority (FINMA). Swissquote is not authorized as a bank or broker by any US authority (such as the CFTC or SEC) neither is it authorized to disseminate offering and solicitation materials for offshore sales of securities and investment services, to make financial promotion or conduct investment or banking activity in the USA whatsoever.

This website may however contain information about services and products that may be considered by US authorities as an invitation or inducement to engage in investment activity having an effect in the USA.

By clicking “Continue”, you confirm that you have read and understood this legal information and that you access the website on your own initiative and without any solicitation from Swissquote.

Research Market strategy
by Swissquote Analysts
Daily Market Brief

USD rally on pause... for now

USD consolidates gains, EM currencies bounce back

By Arnaud Masset

After rallying aggressively since the beginning of the week, the greenback retreated against most of its peers as investors took a breather to assess the dollar’s outlook. The dollar index rallied as much as 1.16% since Monday morning and hit 99.68, thanks to a sharp debasement in the CHF (-1.80%), the JPY (-1.10%) and the EUR (-0.95%). Emerging markets were also badly hit with the TRY, PLN and ZAR falling 1.80%, 1.25% and 1.05% respectively. Despite this temporary setback for the greenback, we remain dollar positive as we believe the market is not done pricing in the upcoming rate hike by the Fed (implied probability for an upside move, extracted from the Fed funds futures, stands at 95.3%).

Emerging market currencies are on the front line, especially after the rise of downward pressure in commodity prices, which was mostly triggered by worries over China’s economic outlook. This morning, Asian EM have had a hard time keeping their heads above water, with the exception of the South Korean won that rose 0.30%.

Across the Pacific, USD/BRL continued to trade within its uptrend channel and is currently testing its 200dma that stands at around 3.2147. The publication of April’s inflation data will most likely leave investors unmoved. Headline inflation is expected to come in at 4.10% y/y, down from 4.57% in March, which would make it the lowest read since July… 2007, when it stood at 3.74%.

The BCB has been cutting the Selic aggressively since October last year and has even speeded up the process recently by cutting it 1% down to 11.25% in April. This is rather good news for the Brazilian economy as it gives a breath of fresh air on the credit side. Unfortunately, this move will make the Brazilian real less attractive for carry traders, which explains why the real has begun to reverse gains starting mid-March. USD/BRL closed Tuesday’s session at 3.1894 and is expected to open slightly lower this afternoon as the USD consolidates gains.

Gold is still suffering as risks fade

By Yann Quelenn

Since mid-April, gold has continued to decline and it is now around its lowest level since March. This comes as the French election fears have now faded and also recession risks have seemed to be lower for some time.

There are a few things to be said anyway though. First data from the first quarter of the US economy has clearly been mixed in terms of growth and car sales. Recent data was better, such as non-farm payrolls which printed above 200k for April and the unemployment rate fell to 4.4%. As a result, we believe markets are buying back the Fed storytelling about the rate path. President Trump is less and less at the centre stage of the markets and the Fed is clearly back in.

In Europe, the French elections provided uncertainties but it seems that as Emmanuel Macron’s victory was even larger than expected, this removed it all. Fading European political uncertainties are also sending gold lower.

Technically-wise, the yellow metal should likely monitor the $1200 level. In case of a bearish breakout, we could see gold back towards levels of around $1150.

 
Live chat