WILL G10 FX CONTINUE FLAT?

Key Story Today (Source: FT):

USD valuation is highly dependent on Excess Reserves.

  • Last week short-term US lending markets jammed up, sending the cost of borrowing cash overnight to historic highs;
  • The NY Fed repeatedly intervened in US money markets and on Friday announced a series of longer-term measures designed to ease congestion over critical periods such as the end of September, when banks tend to try to shrink their balance sheets to qualify for gentler regulatory treatment.
  • the dollar’s value tends to track closely the amount of excess reserves in the system. The more excess reserves available, the higher the supply of the USD.
  • This will lead to a lower valuation of the USD.

Overnight Markets:

G10 FX trading was mostly flat in the Asia-Pacific session, with little out there to set larger price moves in motion. Regional data releases were few and far between, while news wires stayed quiet.

CHF was the worst G10 performer, while its safe haven peer JPY managed to recover its initial losses. A source pointed to Japanese names buying USD/JPY at one point. The leg higher occurred as Mini S&P futures took out yesterday's highs, but the pair returned to neutral levels since.

PBoC Gov Yi noted that China's central bank isn't in a rush to act, like some other central banks are.He stressed the need to preserve room for normal monetary policy, rather than considering QE or negative interest rates.

Also, this morning the NZD is showing up as the stronger currency while the GBP is the weakest.

Forex Related Economic Releases:

On Tuesday data events to look out for include the French business climate indicator at 0745 BST, the Ifo survey at 0900 BST and finally data on U.S.consumer confidence at 1500 BST.

Yesterday's FX Performance

Forex Volatility Chart

Posted on

September 24, 2019

in

Market Updates

category

Interested in Investing with us?