US Dollar Analysis & News
- EUR/USD Approaching 1.2000
- Watch Out for Possible Month-End USD Selling into London Fix
- GBP/JPY Tends to Outperforms on Last Trading Day After Strong Monthly SPX Gains
The USD has begun the week, much how it had finished last week, on the backfoot as month-end flows dictates G10 FX. The notable beneficiary has been the Euro which is looking to make a retest of the 1.20 handle. However, while there may be rising concerns of ECB verbal intervention again as EUR/USD nears 1.20, there is a sense that this time it may be different. The key reason being that the Euro TWI is not at multi-year highs as it was in the Summer, meaning that the FX passthrough into a softer inflation outlook is lower.
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EUR/USDvs EUR TWI
Watch Out for Possible USD Selling into London Fix
This month has seen a stellar rise in equity markets following a Biden victory and recent vaccine optimism with the S&P 500 posting its second-best monthly gain this year (rising 11%). In turn, the consensus is for above-average month-end USD selling into the London 4pm fix. As a reminder, back in April after the S&P 500 saw 12% monthly rise, the USD had come under heavy selling in the run-up (between 1500-1600) to the month-end London fix.
Another observation is that whenever the S&P 500 has had a monthly gain over 3%, GBP/JPY has tended to perform well into the London fix. That said, while markets remain on Brexit headline watch, I don’t rule out another strong performer into the fix.