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It's the end of nine months of phoney war today as the UK triggers Article 50 and sets in motion the two-year negotiation process that will culminate in divorce from the EU. GBP bulls are already scarpering sending GBPUSD down some 200 pips since Monday.
Article / 07 July 2016 at 14:45 GMT

FX Board: USD rally fizzles ahead of payrolls

Head of FX Strategy / Saxo Bank
Denmark
  • USD rally rejected in commodity currencies
  • Cable pokes above 1.30 handle
  • NZDUSD gains on risk-on shift

Auckland
 The NZD has rallied in tandem with the risk-on shift. Photo: iStock

By John J Hardy

Key developments in FX today

  • Churning and chopping were the main course for FX traders yesterday and today as the recent USD rally attempt was rejected in most pairs, particularly the commodity currencies, which were sharply strong from yesterday's lows. Even AUDUSD is near the top of the range for the week after the S&P 500 ratings agency downgraded Australia's debt overnight, while NZD and CAD posted stronger comebacks. 
  • Sterling managed a respectable consolidation and GBPUSD poked above 1.3000 today, though that level was not holding as of this writing. The EURGBP selloff, meanwhile, managed just below 0.8500 before bouncing.
  • Elsewhere, EURSEK is pressing to new local highs and looks ready to challenge the multi-year highs if it can maintain above 9.40/45.
  • Precious metals remain in consolidation mode as they seem to be functioning as a safe haven with the rebound in risk appetite.
  • Please see the attached FX Board PDF with comments.

NZDUSD

NZDUSD has charged back higher as risk appetite has recovered and perhaps on the focus on a dovish Federal Reserve (even with stronger US data yesterday hardly registering a shift in Fed expectations) and the assumption that the bar is very high for US data to actually move the Fed to hike rates. 

As well, an AUDNZD collapse on the overnight downgrade of Australia's debt by the S&P ratings agency. A clearing of recent highs post-US jobs numbers tomorrow could shift expectations quickly toward the 0.7500 area.

nzdusd
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Source: Saxo Bank


— Edited by Michael McKenna
John J Hardy is head of forex strategy at Saxo Bank
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FX Board for Thursday, July 7, 2016

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