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FX: 5 Things To Watch This Week

By Kathy LienForexJun 24, 2019 03:24PM ET
www.investing.com/analysis/fx-5-things-to-watch-this-week-200434243
FX: 5 Things To Watch This Week
By Kathy Lien   |  Jun 24, 2019 03:24PM ET
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Kathy Lien, Managing Director Of FX Strategy For BK Asset Management

Daily FX Market Roundup June 24, 2019

It may be a new trading week but last week’s themes have carried over to Monday’s trade as the greenback extended its losses against most of the major currencies. The Australian and New Zealand dollars were the biggest gainers after RBA Governor Lowe openly mused about the effectiveness of more rate cuts if “everyone is easing.” This is an awkward comment because while it's true that contemporaneous reduction in rates could result in exchange-rate parity, lower borrowing costs go a long way in helping businesses and consumers domestically. Regardless, the market bid AUD and NZD higher as they interpreted this to mean that the central bank could forgo a rate cut next week. The RBNZ meets on Wednesday and today’s gains– which marks the fifth straight day of strength in NZD/USD suggests that investors are not looking for excessive dovishness, let alone a follow up cut.

For the most part, it has been a quiet start to what should be another busy trading week. Here are the 5 things to keep an eye on:

1. G20 Summit – The G20 Summit at the end of the week is the main focus. Based on the price action in the markets, investors are looking for trade talks to resume. The tone of the Trump Administration has taken a turn for the better but the Chinese are skeptical. President Trump and President Xi have agreed to a meeting and as long as it is not cancelled, we expect high beta-currencies to maintain their bid against the U.S. dollar. However should either side cancel the meeting, risk aversion will return instantly, leading to sharp declines in major currencies and flight to safety back into the USD. Whether they agree to work toward a deal is a different story and one that will have a greater impact on next week’s (and not this week’s) trade.

2. Fed Speak – Now that the central bank’s quiet period is over, there are a significant amount of Federal Reserve officials scheduled to speak including Fed Chairman Powell. While we know exactly where the Fed stands (it will be lowering interest rates this year), a reassurance by Powell in the form of dovish comments could turn consolidation into losses for USD/JPY. The next support level for the pair is 106.50.

3. Reserve Bank of New Zealand Rate Decision – The only monetary policy meeting on this week’s calendar is the RBNZ and the last time it met, it cut interest rates but suggested that they were one and done. Investors will be eager to see if that remains true or if RBNZ feels additional easing is needed – like the RBA.

4. BoE Speak – Very little was revealed at last week’s Bank of England monetary policy meeting. It left interest rates unchanged, acknowledged the risks in the economy but indicated that rates could be increased if its forecast was met. On Wednesday BoE Governor Carney will be testifying before parliament on the May Inflation report so expect more clarity on monetary policy. This speech could have a significant impact on sterling.

5. Iran Backlash? – Tensions are high in the Gulf with President Trump signing an executive order to impose additional “hard hitting” economic sanctions on Iran today. Their hope is that maximum pressure will bring Iran back to the negotiation table but if it leads to more provocation in the form of other non-fatal attacks, we could see renewed anxiety in the markets.

FX: 5 Things To Watch This Week
 

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FX: 5 Things To Watch This Week

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Jie zhang
Jie zhang Jun 26, 2019 2:51PM ET
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Can some one explain why the G20 meeting of Xi and Trump is negative for USD while the cancellation of the meeting is positive?
Nicholas P Nicholas
Nicholas_P Jun 25, 2019 12:01PM ET
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This is very hrlpful, rhanks Kathy
Sekiranda Hamza
Sekiranda Hamza Jun 25, 2019 7:27AM ET
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This is a good perspective, Thanks Cathy
Sekiranda Hamza
Sekiranda Hamza Jun 25, 2019 7:26AM ET
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I like the perspective of the article
Daniel Tumusiime
Daniel Tumusiime Jun 25, 2019 4:43AM ET
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Kathy, great analysis, thank you
Nino Nino
Nino Nino Jun 24, 2019 10:57PM ET
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kathy, will you comment on the markets that will be affected with the negotiations with China? which and bearish or bullish.
Agiel Duhaney
Gilles94 Jun 24, 2019 6:59PM ET
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Not  sure  if  the  G 20  meeting  with  Trump  and  Xi  having  private  trade  talks  will  result  In  higher  bidding  for  USD  if  talks  fall  flat...….maybe  the  EURO  will  take  center  stage.  Thanks  for  your  summary  Kathy!!!
Emre Koray Gencsoy
ekgencsoy Jun 24, 2019 6:23PM ET
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The only argument to think for a rate cut is dotplot, besides that if you listened what Powell said during FOMC press conferance and statement; there are dependencies for a rate cut, they watch these parameters, events and as per the analysis they made; it is not a good idea to cut rate for now, which means they will not cut it until they see the alteration in the course. International trade is one of these dependencies; we will see how it will end in G20.
Oael Els
Oael Els Jun 24, 2019 5:49PM ET
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Thank you so much! You are great :)
Ana Luisa De AGuilar
Ana Luisa De AGuilar Jun 24, 2019 5:32PM ET
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Thanks Kathy for the analysis.
Uz IL
Uz IL Jun 24, 2019 4:37PM ET
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Thanks Kathy!
john hincapie
john hincapie Jun 24, 2019 3:54PM ET
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thanks Kathy for your info
Jude Especkerman
Jude Especkerman Jun 24, 2019 3:50PM ET
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Thanks Kathy for the analysis report
 
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