Daily Currency Update

USD - US Dollar

The markets are experiencing a calmer tone this morning, leading to a general decline in the value of the USD. News yesterday revealed that the Italian government's decision to limit the windfall tax on local banks has caused a strong recovery in European stock markets. Bond performance has slightly improved, and energy prices are holding steady following a rebound in crude oil from its earlier intraday low. The USD is predominantly trading lower compared to other major currencies. The upward trend of the USD observed in July seems to have halted; with the Federal Reserve adopting a more neutral stance and reaching the peak of its policy adjustments, it will become increasingly challenging for the USD to manage gains in the short term. Tomorrow's release of US CPI data might still surprise the markets with a slight uptick in price growth, but relying solely on this factor might not propel the USD significantly higher. Potential gains in the Dollar Index (DXY) are likely to be constrained within the mid to upper 102 range. On a different note, yesterday's robust 3-year treasury auction was mainly fueled by strong interest from foreign purchasers. These results paint a positive picture for today's 10-year auction ($38 billion) and indicate that overseas investors are not overly concerned about the recent US sovereign credit downgrade issued by Fitch last week.

CAD - Canadian Dollar 

The CAD hasn't moved much despite the improved risk environment, as it remained within a narrow and steady range against the USD during overnight trading. The USD/CAD's upward movement reached its highest point just slightly below 1.35 yesterday. The CAD's performance was assisted by the recovery in crude oil prices and stocks rebounding from their lows. Corporate sellers have not yet capitalized on the USD's rise to its highest levels since early June.

EUR - Euro

The announcement made by the Italian government yesterday evening, indicating that the windfall tax imposed on Italian banks will have a cap (set at 0.1% of risk-weighted assets), implies that the potential costs might be notably lower than initially anticipated. The EUR has gradually increased its value from the lower range around 1.09, a level it had touched early yesterday. The area around 1.09 has served as a stable support for the EUR in the past week. If the EUR manages to surpass 1.10 and move higher, it would contribute to a positive and short-term upward momentum.

GBP - British Pound

The GBP is exhibiting a somewhat weaker performance this morning, but the factors behind the decline are not fully evident (as there were no data releases from the UK). Sterling still appears to be relatively undervalued in a broader context, and the possibility of a prolonged cycle of tightening in BoE policy is still a significant market concern. Overall, the British pound is likely to maintain strong and well supported on dips.