Global Forex Market
THE US dollar witnessed a sell-off, down 1.7% to 96.677, marking a twomonth low as risk-on sentiment permeates global markets after Us-china tension dwindled as President Donald Trump’s measures were seen not as severe as feared.
The sell-off in the dollar later intensified as incoming economic data showed signs of a global economic recovery from the coronavirus pandemic. This helped offset concerns over the worst civil unrest in the United States in decades.
Brent surged 13.19% to US$39.99 per barrel, supported by crude oil supply cuts in the previous week and improving global demand as many countries gradually lifted the lockdowns. Besides, the Brent received additional impetus following rising expectations that major producers agreed to deepen the output cuts.
The euro appreciated by 2.13% to 1.134 to a 12-week high as the European Central Bank (ECB) ramped up stimulus during its monetary policy meeting. The ECB increased its pandemic emergency purchase pro
€600bil €1.35 gramme by (YTD: trillion) to bolster the region’s economy following the pandemic crisis. The duration of its crisis bond-buying programme would be extended from the end of 2020 until June 2021, or until the bank believes the crisis is over.
Nevertheless, the ECB kept its benchmark interest rates such as the main refinancing operation, deposit facility rate and marginal lending rate at 0%, -0.5% and 0.25%, respectively, which also fell in line with expectations. The central bank now expects the eurozone economy to contract by 8.7% this year before rebounding to a 5.2% growth in 2021 and 3.3% in 2022.
The pound strengthened by 2.06% to 1.260 on the back of a weaker dollar which helped shrug off ongoing Brexit noises. There was little progress made during the UK-EU talks on a post-brexit trade deal but UK Prime Minister Boris Johnson has pledged not to ask for an extension to prevent the UK from concluding the transition period at the year-end without a trade agreement. The deadline for the UK to askforanextensionisjune30.
The yen weakened by 1.22% to 109.2 owing to weaker demand for safe-haven assets. Nevertheless, data release this week includes: (1) Jibun Bank’s Manufacturing PMI deteriorating further to 38.4 in May from 41.9 in April (cons: 38.4); and (2) May’s Jibun Bank Services PMI rising to 26.5 from 21.5 in April (cons: 25.3).
The Asia ex-japan currencies strengthened across the board against the weaker dollar. The rupiah came in as the outperformer for the week, rising 3.52% to 14,095 as the Indonesian government unveiled a