GBPUSD at a 6-month low

One day we will be able to stop writing about the impact covid-19 is having on the foreign exchange markets but we are not there yet. The global rise in cases is weakening the commodities markets. That tends to strengthen the US Dollar and we saw that quite clearly yesterday.

The GBPUSD rate is down to levels we haven’t seen since January. $1.3645 is where we are today and this pair hasn’t been lower since the end of January. And you could argue that there is a head and shoulders pattern in the chart which points to $1.34 but we will have to see if that plays out. The confusion over the rules for reopening the UK economy appears to be the problem for the Pound but the US Dollar is strong across the board.

The EURUSD rate is also down. $1.1775 is a level that attracts buyers though. We saw that in April and in November 2020. If the USD can push this pair lower, then the larger support comes in at $1.1640.

Dollar and Yen attract safe haven buyers

The Japanese Yen is also attracting safe-haven buyers in response to the covid news but also after a rise in Japanese inflation. 0.2% annual inflation is minuscule by most standards but deflation has been the story in Japan since September 2020. As a result, the Yen has strengthened against the US Dollar (JPY 109.60 this morning) and is down to JPY 149.60 against the Pound.

RBA minutes and lockdown weaken AUD

By way of contracts, the Australian Dollar is on the back foot. The minutes from the last Reserve Bank of Australian meeting showed no propensity for interest rate hikes until 2024 and that, plus the lockdown across South Australia, combined to weaken the AUD. Despite Sterling’s weakness, GBPAUD is up to AUD 1.8645 this morning and the AUDUSD rate is down to 0.7320 this morning, a level not seen since November 2020.

The rest of the day is lean as far as data goes but there will be a few morsels from the US later on. Building permits and housing starts data is always influential as a test of consumer and construction sector confidence. We will also see the Fed’s Red Book.

NZD poised for dairy prices

The New Zealand Dollar is likely to be lively overnight. It always reacts to the global Dairy Price Index because dairy forms such a large chunk of New Zealand’s export income. The previous data showed a 3.6% decrease in dairy prices. A bounce-back is the most likely outcome, so NZD strength before the UK dawn is possible.

And on this day in 1969, Neil Armstrong and Buzz Aldrin were the first men to land on the Moon and step onto its surface. Or they walked around a film set in Area 51. It’s anyone’s guess but I am old. So when I sat crohalo finass-legged in the school hall and watched them on a 26” TV in black and white, it all looked real to me.

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