Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

FX: Quiet End To Q2 As Q3 Uncertainty Looms

By Kathy LienForexJun 30, 2020 21:19
uk.investing.com/analysis/fx-quiet-end-to-q2-as-q3-uncertainty-looms-200443470
FX: Quiet End To Q2 As Q3 Uncertainty Looms
By Kathy Lien   |  Jun 30, 2020 21:19
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
As the second quarter draws to a close, we reflect on the gains in equities and currencies. While the COVID-19 pandemic scarred the markets at the end of the first quarter, recovery was the primary theme of Q2. Countries went into lockdown in February and March and began to ease those restrictions in May and the latest June. For investors, consumers and central banks, fear and panic gave way to optimism. The Dow Jones Industrial Average gained 15% over the past three months, while the NASDAQ Composite rose a whopping 28% to record highs. Markets around the world recovered with double-digit rallies seen in the DAX, Nikkei 1000, S&P 500 and TSX. High beta risk on currencies like euro, and the Australian and New Zealand dollars performed particularly well, with AUD and NZD reaching multi-month highs. Safe-haven flows eased out of the U.S. dollar, which weakened against all of the major currencies in Q2.
 
However, as the third quarter begins, tides are shifting and fear is returning. Q2 gains offer cold comfort in uncertain times. The U.S. government is losing its battle with the coronavirus pandemic as some of the most populous states report alarming increases in case numbers. Many governors paused or reversed reopening measures and the economic impact could be significant if more follow. The recovery could slow dramatically as Americans go back into lockdown mode. The U.S. is not alone in experiencing fresh flareups. Australia imposed a strict four-week lockdown in 10 areas of Melbourne, its second most populous state. The government announced fines for anyone leaving their homes for any activities not deemed essential. Other states in Australia also barred travel from the Victoria region. The Australian dollar reversed earlier gains and traded sharply lower as a result. The U.S. may still be in its first wave, but second wave fears are returning for other countries. Unless governments take the necessary steps to get the virus under control quickly, end of Q2 growth could disappear in Q3 quickly.  
 
Investors continued to buy U.S. dollars ahead of Thursday’s early nonfarm payrolls report. Economists are looking for more job growth, but the unemployment rate could be revised higher or worsen. Consumer confidence rebounded in June, but everyone knows that American moods are souring with COVID-19 cases rising. The Chicago PMI manufacturing index rebounded less than expected from a 38-year low. Federal Reserve Chairman Jerome Powell and Treasury Secretary Steve Mnuchin testified before Congress today. Their comments were relatively optimistic, with Powell saying the U.S. entered its new phase sooner than expected with recent data offering positive signs. Mnuchin said the White House and Senate are working on additional financial relief by the end of next month. 
 
With ADP and Challenger due tomorrow, the focus will shift quickly to NFP. The June FOMC minutes are also due for release – central bank liquidity is the only factor propping up the market.
 
Risk aversion drove the euro and sterling lower against the U.S. dollar today. According to the latest reports, the Eurozone avoided deflation in June. After falling 0.1% in May, consumer prices rebounded 0.3% in June. Investors shrugged off this report as it was telegraphed by yesterday’s German CPI and more importantly has zero impact on near-term ECB policy. The uptick in CPI won’t encourage the European Central Bank to consider raising interest rates. UK GDP growth was revised lower in the second quarter to -2.2% from -2%. Private consumption was weaker than initially estimated, falling 2.9%, down from -1.7%.
 
The Canadian dollar shrugged off better than expected GDP numbers because at -11.6%, the contraction in April was deep even if it beats the -12% forecast. Risk aversion and mixed data kept the New Zealand dollar under pressure. Business confidence was revised lower in June, while the activity outlook was revised higher. Chinese PMIs also improved last month.
 
Looking ahead, we have Australia’s manufacturing PMI index and New Zealand’s building permits report due for release this evening. Japan’s Q2 Tankan survey is always worth watching, but there’s no question that deterioration in sentiment is expected all around. 
 
FX: Quiet End To Q2 As Q3 Uncertainty Looms
 

Related Articles

FX: Quiet End To Q2 As Q3 Uncertainty Looms

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email