US Trading Session Wrap Up

Essential Insights

• Brexit negotiations set to resume today
• Dollar drops to a decade low, almost reaching 92.0
• Gold rebounds after an initial slip, rising back above $2,000 an ounce

GBP

UK chief negotiator David Frost is set to meet with EU chief negotiator Micheal Barnier, to negotiate and discuss the future of the UK-EU trade relationship. Recent comments indicate fresh optimism on a deal between the two parties, this could turn into an EU recovery fund situation where optimism was low prior to the meeting, however, the talks concluded in success.

Before that, 50 officials from both sides will voice there opinions and concerns through Wednesday to Thursday, before the two chief negotiators recoup on Friday.

These talks are scheduled to come to a conclusion by the 2nd of October this year, however, PM Boris Johnson believes ‘a deal can still be reached in September’, according to Jamie Davies, a spokesman for the prime minister.

It will be interesting to see how the UK will be able to transition in the event a deal is met, and the PM has been giving vague signals around optimism, it was only last June that the PM said a Brexit deal is essential off the table.

GBP/USD exchange rates have pushed higher, albeit a weaker dollar index. Though traders must bear in mind that the Pound is likely in for a reality check, with UK Chancellor Rishi Sunak unveiling plans over the summer, that includes reducing support on furlough schemes, potentially placing millions of jobs under threat.

Should this be enforced, the dire situation of the UK will become very apparent and the sterling is likely to experience a rude awakening.

NZD

NZD/USD slipped earlier today reaching 0.6520, however, reversed some of that weakness following the US trading session.

Prices are currently trading at 0.65966, though still remain down on the day despite significant dollar weakness. Much of this upside resilience can be attributed towards the Dovish tone set by the Reserve Bank of New Zealand, where once again the doors have been left open to negative rates.

Almost all other major central banks have discounted this possibility/downplayed it, however, recent outbreaks in New Zealand which previously had a very low infection rate may cause concern.

Investors must ask if this is another ploy by the RBNZ to artificially lower exchange rates, they mentioned high exchange rates as being an issue before, or if this is a genuine option that the RBNZ is considering.

The latter is likely to see NZD fall sharply. Lower exchange rates are beneficial for net exporting countries such as New Zealand.

AUD

The AUD did not really move following RBA minutes, though this was expected as the meeting itself did not offer any real further guidance initiatives on top of what has previously been mentioned in previous minutes.

USD/JPY

USD/JPY has fallen sharply over the trading day, down -0.56% at the time of writing, similarly to the above, due to a weaker dollar index.

Citi Bank reports that there is scope for further downside with US yields remaining supported. USD/JPY exchange rates typically act adversely to US yields.