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Dollar holds firm, safety bets gain on risk retreat

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Forex news from the European trading session – 19 August 2021

Headlines:

Markets:

  • JPY leads, AUD lags on the day
  • European equities lower; S&P 500 futures down 0.8%
  • US 10-year yields down 4.3 bps to 1.23%
  • Gold flat at $1,788.51
  • WTI down 3.8% to $62.98
  • Bitcoin down 0.2% to $44,433

The dollar started the session in good stead, as it was broadly bid after a fall in EUR/USD below 1.1700 to fresh lows on the year in Asia Pacific trading.

The momentum largely continued in Europe, though mostly against commodity currencies as a host of large expiries in EUR/USD is keeping price action contained between 1.1670 to 1.1700 for the most part currently.

Risk tones soured further as the market continues to digest delta variant concerns, with Fed taper expectations still staying on track before the year-end.

European equities sold off heavily alongside US futures, with the former seeing declines averaging close to 2% across the board while the latter fell by 1% at the lows before moving just off that now ahead of North American trading.

With Treasury yields looking heavy amid a flight to safety, that is keeping the yen, dollar and franc as the top performers. Of note, USD/JPY retreated from 110.20 to 109.50 as softer risk sentiment outweighed the early dollar bids in the pair.

Commodity currencies were the biggest laggards with AUD/USD falling by 1% on the day and from 0.7190 to 0.7145 in European trading, while NZD/USD extended its fall from 0.6850 to 0.6810 as the technical landscape crumbles for the antipodeans.

USD/CAD also saw a surge higher from 1.2700 to 1.2770 at the highs, with the loonie not helped by a further plunge in oil prices as WTI slips by nearly 4% to below $63.

It’s still all about the risk mood for now as the market reassesses the optimism early in the summer amid delta variant concerns. Given the technical picture across broader markets and especially in risk currencies for FX, the pain train looks set to continue for now before the focus shifts towards Jackson Hole next week.



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