US DOLLAR
The Dollar has traded generally firmer in active markets. The New Zealand Dollar dove over 2% in hitting its lowest level against the U.S. Dollar since January 2016, at 0.6377, and sank to near seven-year lows in the case against the Yen. This followed a 50 bp rate cut by the RBNZ -- the first cut of such magnitude since 9/11 -- which put the cash rate at an all-time low 1.00% and which was pinned on flagging growth conditions as a consequence of simmering trade tensions and a global economic slowdown. AUD-USD fell in sympathy, smashing through the early January flash-crash low on route to printing a 10-year nadir at 0.6677. The RBNZ's move comes after the RBA signalled yesterday that more rate cuts could be in the pipeline, after cutting in both June and July. AUD-JPY dove into 10-year low territory. Both the Thai and Indian central banks cut rates, unexpectedly in the case of the former and by a more than expected 35 bp in the case of the latter. Elsewhere, the Yen lifted against the Dollar and Euro, though remained below highs seen earlier in the week. USD-JPY posted a low at 105.93, extending the retreat from yesterday's 107.09 high. EUR-USD made a slow descent under 1.1200, coasting towards 1.1180 after skirting to a high of 1.1219 earlier. Stock markets were skittish in Asia, but rose in Europe, aided by President Trump's utterances about wanting to remain in negotiation with China on trade, and Beijing's pledge not to use its currency as a trade weapon, along with central bank easing measures. USD-CNY was fixed higher today, at 6.9996, an 11-year peak in the official fixing but just off the politically-sensitive 7.00 level.
CANADIAN DOLLAR
USD-CAD rallied to a seven-week high at 1.3315. The gains come with oil prices having declined sharply over the last week, with front-month WTI crude prices have dropped by over 8.5% from week-ago levels, reflecting the air of pessimism in global markets with regard to the consequences of the ratcheting-up trade warring between the U.S. and China. Sustained oil prices swings impacts Canada's terms of trade, which in turn affects the valuation of the Canadian currency. USD-CAD support comes in at 1.3207-10.
EURO
EUR-USD made a slow descent under 1.1200, coasting towards 1.1180 after skirting to a high of 1.1219 earlier, during the Asian session. This puts in a some space from the near three-week high seen yesterday at 1.1249, which was the culmination of four consecutive sessions of ascent as the pair rebounded from the 27-month seen last week at 1.1027. President Trump's ratcheting up of his trade war with China has increased the odds for Fed easing given the potential for a detrimental impact on the U.S. economy. This in turn has seen the dollar weaken against some currencies, including the euro. The ECB is geared-up for cranking up stimulus in September, however, which along with the palpable risk of a disorderly, no-deal Brexit scenario in less than three months, should curtail EUR-USD's upside potential. Resistance comes in at 1.1250, and support at 1.1160-65.
BRITISH POUND
The pound has settled lower after the heavily-shorted currency saw a positional-driven rally earlier in the week. Cable nudged back under 1.2150 after failing to sustain gains above 1.2200 yesterday, while EUR-GBP lifted back to around 0.9200, drawing back in on its 24-month high at 0.9249. We see little scope for a sustained rebound in the UK currency, with investors and overlay managers demanding a hefty discount in sterling due to the no-deal Brexit risk. EU negotiators stated yesterday that there was currently no basis for "meaningful discussions" and talks were back where they were three years ago, and that Boris Johnson's is intent on leaving without a deal. Downing Street has rejected this assertion, calling for the EU "to change its stance." These developments, along with the fact that parliament may now effectively be powerless to stop a no-deal Brexit -- the conjecturing being that Johnson would have the power to dictate the timing of a general election even in the event his government was pulled down in a confidence vote -- has further fed the risk for a no-deal, no-transition Brexit.
JAPANESE YEN
The Yen hit seven-year highs against the New Zealand Dollar, and a 10-year high in the case against the Australian buck, reflecting underperformance in the trade-sensitive antipodean currencies following the RBNZ's 50 bp rate cut. There has also been a returning degree of safe haven demand for the Japanese currency amid a backdrop of skittish stock markets despite President Trump's utterances about wanting to remain in negotiation with China on trade, and Beijing's pledge not to use its currency as a trade weapon. USD-JPY posted a low at 105.93, extending the retreat from yesterday's 107.09 high, though remained above yesterday's seven-month low at 105.52. USD-CNY was fixed higher today, at 6.9996, just off the politically-sensitive 7.00 level. On the Japanese news front, a bank lobby warned the BoJ against deepening negative rates, given the detrimental impact on the banking business model. We expect USD-JPY's bias will remain to the downside, at least while risk-off conditions persist. The pair has resistance at 106.80-82.
