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US dollar rises after attacks on Saudi facilities

US dollar rises after attacks on Saudi facilities

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Erik Holm - Head of media

The US dollar rose in the morning hours of the European trading session. Fears about a significant increase in oil prices and the Gulf conflict led to a decrease in demand for risky assets before the start of a two-day Fed meeting.

Almost all analysts predicted a decrease in the target range of rates for US federal funds by 25 basis points. This was until the last days when unexpectedly good data in retail sales and US consumer sentiment, combined with hopes for a breakthrough in resolving the trade conflict with China, weakened arguments in favor of easing the Fed’s monetary policy.

The sharp rise in oil prices after the Saturday attack on Saudi oil facilities further clouded the picture, as it is likely to lead to higher inflationary pressures if oil prices remain high.

According to a forecast from Investing.com, the probability that the Fed will lower the interest rate on Wednesday fell below 65%.

However, according to an ING analysts, the main consequence of the sharp rise in oil prices so far has been a significant increase in the price of the US dollar, except for the option that the Fed will deploy monetary policy in the direction of its exceptional easing, the demand for the dollar will remain high, and the EUR / USD pair will fall in price to 1.05 – 1.10.

The euro was trading at $ 1,1012 before the markets today receive the first significant indicator of the economic situation this month - the ZEW economic sentiment index in Germany.

The dollar also rose to a maximum of four days against the offshore yuan, which remains under pressure after the release of weak economic reports of China on Monday.

The British pound also remained under pressure after the visit of British Prime Minister Boris Johnson to Luxembourg on Monday was further evidence of the absence of any progress in negotiations with the EU on the issue of signing the Brexit transition agreement.

The euro's movements after the ECB meeting

The euro's movements after the ECB meeting

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Jim Anderson - Public Relations

The euro fell and bonds rose after the European Central Bank announced interest rate cuts and a new quantitative easing program to support the region's weak economy. The single currency turned out to be about a two-year low, as the monetary institution said it would lower interest rates to -0.50% and resume its bond purchase program by 2.6 trillion euros in November at a rate of 20 billion euro per month. The regulator also said that it will introduce a two-tier negative rate policy system.

Eurozone bond yields fell to negative territory this year amid expectations of more stimulus from the ECB in the face of growing geopolitical risks, from Brexit to the US-China trade war. Meanwhile, the euro has hit its lowest level in the past two years this month.

The single currency fell by 0.42% to $1.0960 at 13:00 London time. Yields on 10-year German bonds fell by 4 basis points to -0.61%, while yields on sovereign bonds in Italy fell by 13 basis points to 0.85%.

But soon the euro won back all losses after ECB President Mario Draghi noted that the probability of a recession is low, adding that negative indicators created many positive effects. He fended off Trump's claims after yesterday's rate cut, saying the ECB was not aiming at a competitive devaluation. EUR / USD soared more than a figure from the low of the day, rising at the moment to the level of 1.1041. Earlier, the euro fell by 0.8% to 1.0926.

The euro’s upward movement is partly due to a short coverage in EUR / JPY before the positive opening of the NYSE; the spot is now approaching the large 1.1000 options that expire in the next two days. That is, they can keep the market on this level until the weekend.

Dollar peaks at six weeks against yen due to easing trade tensions

Dollar peaks at six weeks against yen due to easing trade tensions

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Erik Holm - Head of media

The dollar rose to a six-week high against the yen on Thursday after Washington and Beijing took steps to meet each other in trade, triggering an increased risk appetite for investors. China has exempted 16 categories of US products from additional duties, including whey and fishmeal used in animal feeds, some cancer drugs and lubricants, the Chinese Ministry of Finance said on Wednesday.

US President Donald Trump tweeted that he would postpone the increase in tariffs on Chinese imports planned for October by two weeks. The yen dropped 0.47% to 74.35 against the Australian dollar and 0.21% to 108.04 against the US dollar at 6:34 London time, previously reaching 108.16, the lowest level since August 1.

"Australian" reached a six-week high, while the Chinese yuan rose 0.4% to a three-week high of 7.0855 per dollar. The euro stabilized at $ 1,1014 in anticipation of the outcome of the ECB meeting, before dropping to a weekly low of $ 1.0983. The pound fell after a Scottish court on Wednesday declared the illegal suspension of parliament. The pound was trading without sharp fluctuations at $ 1.2328 after falling 0.4% to $ 1.2313 the day before.

The situation on the Forex market before ECB meeting

The situation on the Forex market before ECB meeting

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Jim Anderson - Public Relations

The yen fell to a six-week low, as demand for safe-haven assets fell amid signs that China's active actions could limit the negative impact of the trade war on the global economy. The euro fell as traders prepared for the European Central Bank to launch a new round of monetary stimulus, while the pound rose on the news that British Prime Minister Boris Johnson could soften his Brexit strategy.

USD / JPY is increasing by 0.2% to 107.81; the pair reached 107.85, the highest since August 1, after the Global Times announced that Hu Xijin said China would announce measures to mitigate the negative effects of the trade war with Washington. Hu tweeted that these steps "will benefit some companies from China and the United States" 10-year-old Treasuries stopped a five-day decline. The currency haven, the Swiss franc, has weakened; USD / CHF rose 0.2% to 0.9940.

USD / JPY is “within reach of the level of 108.00”. The yen remained at a low after news that Hong Kong Exchanges and Clearing Ltd. Unexpectedly offered 36.6 billion dollars for the London Stock Exchange Group Plc. The currency is also under pressure from the news that the Bank of Japan may consider new mitigation measures at a meeting on DC policy next week. The ECB will announce its new policy on Thursday, the Fed on September 18 and the Bank of Japan on September 19.

EUR / USD drops 0.3% to 1.1015, the euro is falling for the second day in a row. Markets expect the ECB to lower its deposit rate and unveil further incentive measures. The 1-week implied EUR / USD volatility jumped to its highest level since January - the indicator covers both the ECB and the US Federal Reserve.

The pound rose on the news that Johnson is considering ways to circumvent one of the UK Parliament’s main objections to the existing Brexit agreement, the border issue with Northern Ireland. Sterling rose 0.1% to $ 1.2359. AUD / USD has not changed much and is trading at 0.6864.

Forex today: Johnson is defeated, the US and China are friends again

Forex today: Johnson is defeated, the US and China are friends again

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Erik Holm - Head of media

There is another surge of optimism in the markets due to optimistic news on trade negotiations. Representatives from both the United States and China confirmed that the parties agreed on a new round of trade talks in Washington in early October. Before that, in mid-September, working meetings of the teams of trade negotiators will be held, aimed at “laying the foundations for tangible progress”.

This triggered a weakening of defensive assets, including the yen and gold. Gold fell back to 1540. USD / JPY jumped by almost 40 pct. to 2-week highs at 106.75, US stock futures and treasury yields also went up. AUD / USD broke above 0.68.

USD / CAD continued to consolidate above 1.32, where it ended yesterday as a result of a favorable combination of two factors at once: oil prices aggressively strengthened by 4%, and the Bank of Canada didn’t show an active pigeon mood.

Meanwhile, the British parliament rejected Prime Minister B. Johnson’s proposal for an early election. Johnson received in his support only 298 of the required 434 votes. Parliamentarians want to first pass a bill empowering them to block Brexit without a deal. Yesterday, the House of Commons approved the draft law by a majority vote, and now it has gone to the house of Lords. The legislation is expected to be completed on Friday. GBP / USD against this background continues to hold steady around 1.2250.