Greenback Gains as Emerging Market Concern Heighten

OFX Daily Market News

Posted by OFX

  United States Dollar

The US Dollar primarily held onto gains enjoyed into last weeks close as a US Labor Day holiday ensured thin volumes through much of the day. The worlds base currency-maintained a near one week high against G10 counterparts as trade tensions, highlighted by the break down in NAFTA negotiations, and ongoing emerging market concerns prompted broader US dollar demand.

Investors reacted to comments from President Donald Trump at the weekend wherein he reportedly warned Congress not to meddle with talks to revamp NAFTA as there was no need to keep Canada in the agreement if they failed to cede to US demands. The comments came on the back of a similar criticism issued on Friday and have dampened any expectation a trilateral trade agreement will be reached in the near term. The break down only adds to an escalation in global trade tensions. Emerging market concerns also weigh on investors’ appetite for risk as escalating economic crises in Turkey and Argentina are prompting a flight of capital away from developing economies and back into the USD.

Attentions now turn to ongoing trade talks and key manufacturing data and construction spending figures out later this morning in North America. The data and trade headlines will give the greenback its broader direction through trade on Tuesday.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.3090-1.3179

The USD/CAD has moved within a tight 30-pip range on Monday mostly because markets were closed Canada and the US as North America observed the Labor Day holiday on Monday. With no local economic releases for the loonie traded in a broad range over the last 24 hours. The loonie tested support at 1.3061 and currently sits at the resistance of 1.317.

Today we had the release of Markit Manufacturing PMI for August expectations were for 56.9 and the printed number came in above expected sighted at 57.8. More importantly, market participants will be keenly attuned to tomorrows Bank of Canada monetary policy decision on interest rates which are expected to remain unchanged at 1.5%. As mentioned participants are expecting the BoC to hold this month but will be watching for clues on the possibilities of an October rate hike.

On the technical front, initial support is seen at 1.3090 while resistance is at 1.3157 and 1.3201.

 

 

 

  Euro

EUR / USD Expected Range: 1.1550-1.1621

A series of PMIs were released from the Eurozone yesterday morning. The Eurozone print came in better than market forecasts but the indices for Germany, France and Italy mostly disappointed, and so the euro was reasonably steady early on.

Euro traders now turn their attention to a relatively quiet Tuesday on the domestic economic calendar with only the M/M PPI figures to drive direction. Off-shore releases may also affect the pair, however, with ISM Manufacturing PMI due for release in the US. In the meantime, we’re seeing the dollar catch a bit of a bid with EUR/USD falling to fresh week lows this morning.

 

 

 

  British Pound

GBP / USD Expected Range: 1.2814-1.2876

The pound fell on Monday following the negative Brexit headlines over the weekend, namely Barnier’s reaction to the Chequers proposal. The quid was sold off further following the release of a weaker than expected UK Manufacturing PMI print on Monday, which came in at 52.8 vs. 53.9. It was the weakest print for 25 months. Meanwhile, the USD continued to strengthen through the day despite it being a public holiday in the US and Canada.

Cable is licking its wounds a bit this morning, but there’s good support at and just under the 1.28 big figure. Perhaps it will get a lift if the current BoE Governor Carney announces today that he will be staying on beyond June next year, this as speculation mounts in the papers. He’s due to hold a press conference this afternoon.

UK economic data to be aware of is the Construction PMI which missed expectations of 55.8 posting a 52.9. UK Inflation Report Hearings have also been released. As usual, Brexit rhetoric and headlines will no doubt continue to dominate, though.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7157-0.7235

Markets were relatively quiet with the US on holiday and investors took the opportunity to take profits off the table. Grinding its way above the 0.72 handle, the Aussie opens this morning in North America just under at 0.7182 after a dismal start to the week which saw the Pair touch its lowest level in 20 months.

The Aussie participants turned focus to the RBA policy announcement overnight in which RBA left rates unchanged at 1.5%. It was widely expected interest rate would remain unchanged and neutral tone in the RBA statement held the Aussie within its current trading range against its trading peers.

The Australian Dollar spent much of Monday below the 0.72 level, bouncing between 0.7164 and 0.7215 for much of the session. The impetus for the declines were poor domestic figures and growing concerns over mortgage rate increase, with the latest salvo from the ABS also hurting the Aussie. M/M Retail Sales was released in Australia on Monday, showing a 0% gain against a forecast of 0.3% growth, a decidedly bearish outcome. The Aussie also felt the impact of disintegrating relations with China and the escalating US-China trade war. Overall, the mix of negative news pushed the Aussie lower.

The Aussie participants turned focus to the RBA policy announcement overnight in which RBA left rates unchanged at 1.5%. It was widely expected the interest rate would remain unchanged and the neutral tone in the RBA statement held the Aussie within its current trading range against its trading peers.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6541-0.6607

The New Zealand Dollar has moved within a tight range against the U.S dollar, but the move was still lower. NZD/USD touched a high of 0.6622 during Asian trade and then began a steady decline on the back of weaker than expected Trade Index. The Statistics New Zealand showed that the Terms of Trade Index improved to 0.6% in the second quarter from -2% in the first quarter but fell short of the market expectation of 1%. The kiwi touched an eventual low of 0.6597 just before the start of Tuesday’s session.

Looking ahead at the economic docket we will see the GDT fairy auction take place tonight with an expected increase in the overall price index of about 2%.

On the technical front, we see initial support at 0.6590 and then 0.6545. On the upside, resistance is seen at 0.6660 followed by 0.6715.

 

 

 

Posted by OFX

Aussie hits fresh yearly lows as China concerns escalate

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar had a day to forget with a precipitous decline to close out last week. The currency was undermined by a number of factors, but the telling result was a fresh yearly low to 0.7175. Opening this morning at 0.7185, the Aussie looks to navigate a politically charged week while the bears stay firmly in the drivers’ seat.

The Aussie spent much of the week oscillating within familiar ranges around the 0.73 mark before succumbing to off-shore pressures from the United States. Again, it was President Trump that was the catalyst for volatility with a clear escalation in his rhetoric with regards to China and tariffs. The risk-on sentiment quickly shifted to risk-off with emerging markets and commodity currencies all feeling the crunch. The global market for base metals also received its own fall which only exacerbated the Aussies declines.

The AUD also felt the pinch domestically with a poor reading in the CAPEX, falling building approvals and Westpac’s mortgage rate hike all adding fuel to the fire. This was then further exacerbated on Friday with reports of rising tensions with China, as Australia looks to ban Huawei mobile phones from its mobile network market. China has responded by denying visas for a number of Australian journalists, inferring a deterioration in our relationship with China.

The pair now turn to a new week firmly against the ropes with traders first turning to retail sales for direction. As always, investors are keeping a close eye on the changing politically landscape for clues as well.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0780 – 1.0980

The New Zealand Dollar struggled to mount any significant directional momentum through trade on Friday moving between 0.6607 and 0.6660 when compared against the Greenback. With Consumer Confidence easing in August the local unit remained on the backfoot for most of the day. According to the ANZ the index fell 0.7% to 117.6 in August, the lowest in two years. Most of the weakness reflected greater concerns about the outlook however, the index remains above its long-run average. Early Friday, Fonterra reduced its forecasted milk price payout for FY19 from $7 to $6.75. Fonterra chairman John Monaghan said the change was in response to stronger milk supply signals coming from some of the world’s key dairy producing regions. The move was not unexpected and this had little impact on the market.

Looking ahead today we see the release of New Zealand’s Overseas Trade Index which measures the change in price of internationally traded goods.

On the technical front expects to see first line of support sitting at 0.6600 followed by 0.6550 with resistance up at 0.6660 followed by 0.6720.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7800 – 1.8150

The Great British Pound fell through trade on Friday ending a mid-week rally spurred on by hopes a Brexit deal will be brokered. Investors looked to absorb profits on moves above 1.30 selling into the rally on Friday and pushing the pound back below 1.2950. Brexit price action remains cautious, despite EU and British leaders optimism a deal will be struck. Markets remain wary of extending gains ahead firm evidence a deal will be negotiated and it is likely Sterling will continue to struggle as underlying economic softness adds to Brexit uncertainty. With the current account deficit growing and corporate confidence shrinking there is a real fear a no-deal Brexit will force larger corporates into Europe while the deficit balloons further when measured as a percentage of GDP.

Opening this morning buying 1.2917 attentions now turn to Manufacturing and Services data, while Tuesday’s Inflation hearing headlines the macroeconomic docket as investors seek greater guidance on BoE policy expectations moving forward.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7130 – 0.7350

The US dollar edged higher into the weekly close recouping the early week losses as risk appetite soured and investors sought haven assets. The upbeat and trade positive news from earlier in the week failed to maintains its momentum through Thursday and Friday as investors reacted to reports the US and Canada were unlikely to reach an in-principal deal that would see both bilateral and Trilateral NAFTA agreements progress. Hope a deal could be struck turned quickly on comments from President Trump and Canadian Foreign Minister Freeland. Freeland intimated Canada is looking “for a good deal, not just any deal”; while Trump doubled down on pressure claiming, “Any deal with Canada would be totally on our terms”. As talks stalled investors scrambled to buy back into the dollar as haven plays took precedence into the end of the session.

Further support came from heightened emerging market concerns as Argentina’s Central Bank voted to raise interest rates to 60% in an emergency meeting on Thursday, amplifying concerns exposures to increasing US interest rates will only tighten the squeeze on emerging markets and extend haven plays further strengthening the USD.

With markets closed for Labor Day Monday we expect a quiet start to the week ahead of Manufacturing and services data and US non-farm payroll numbers. We expect the growth story to be affirmed in this week’s data sets with trade and broader risk sentiment driving direction.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6150 – 0.6250

The Euro opens this morning in negative territory, trading around the 1.1600 mark against its US counterpart. The Euro was mostly the victim of market risk aversion as flights to safety became the moniker of the day last week. Spurred on by a breakdown in US and Canadian trade talks, the market took a decidedly risk-off tone to close out the week. It wasn’t all to blame from off-shore forces however, with the market also reacting negatively to poor news on the domestic front.

Initially adding fuel to the fire was a poor reading on the August preliminary inflation which failed to meet expectations for the Eurozone. While inflation was up 2% Y/Y, the core reading printed at 1% vs the previous 1.1%. While the economic news was only a close miss, the number did put pressure on the Euro. The political situation in Europe also came under fire with Italy’s sovereign debt rating downgraded by Fitch to BBB, an outcome that is decidedly negative for the Eurozone with the Euro also feeling the pinch.

The Euro also came under fire from off-shore events with President Trump again proving the catalyst. His recent comments that Europe’s solution to auto tariffs “was not good enough” left the market jittery that maybe a reconciliation with the US wasn’t on the cards. This sentiment was all but affirmed when the US and Canada failed to reach an agreement on the new NAFTA. Markets, fled to safety soon after with the Euro also part of the sell-off.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9320 – 0.9480

The Canadian Dollar fell sharply through trade on Friday as hopes high level trade talks would prompt an in-principal agreement to revive NAFTA broke down. Having enjoyed strong upside momentum through the front half of last week following a bilateral trade agreement between the US and Mexico was reached the Loonie looked poised to extend gains as rhetoric and commentary proved promising leading into the US imposed friday deadline. Talks however soured as President Trump reiterated earlier comments suggesting a deal would “be on our terms” while Canada Foreign minister responded in kind confirming “no deal was better than a bad deal”. Tumbling back through 0.77 the CAD lost some 90 points into the close buying just 0.7652 at last bell.

With most investors celebrating the labor day long weekend we expect thin volumes and little action through trade on Monday ahead of Trade balance data and a BoC rate statement Wednesday. Recent strength across inflation and labour market indicators could prompt the Bank of Canada to issue a surprise rate hike driving the dollar back through 0.77 and toward resistance at 0.7750.

 

 

 

Posted by OFX

NAFTA negotiations, Australian leadership turmoil & Italian uncertainty

OFX Daily Market News

Posted by OFX

  United States Dollar

The highlight of last week’s opening sessions for the USD was the news that the US and Mexico have reached an understanding on trade and taken the first step to a new free-trade agreement to replace NAFTA. Canada, the other original party, is also set to join negotiations, although Trump was somewhat dismissive of this, saying “we’ll see” to the suggestion. Overall, equity markets rallied across the US after the announcement although the Greenback conversely suffered. The impetus for the fall may be the increasing rhetoric from Trump on his primary trade war target. The new understanding with Mexico and moratorium on the EU tariffs have led speculators to believe Trump is shoring up relationships and focusing all his attention on the world’s second-biggest economy, China. Tellingly, Trump commented in a speech in West Virginia that “China was on the way to be bigger than us in a short period of time. That’s not going to happen anymore”. The declines are likely also impacted from the unwinding of aggregate long positions taken by speculators, with many forces conspiring to precipitate the falls, such as the dovish Fed statement and China’s active steps to stabilize the CNY.

Last week also saw a slew of economic data out for the US, continuing jobless claims posted a 1708k better than last weeks 1728K. Core PCE Price index YoY and MoM both printed a notch higher at 2.3% and 0.1% respectively. Personal income hit consensus of 0.3% while personal spending MoM was just above consensus of 0.35 and printed a 0.4%. Initial jobless claim rose slightly to 213K for last weeks print of 210K.

 

 

 

  Canadian Dollar

Last week’s opening sessions saw the loonie reacted positively, on news that there was a bilateral agreement between the United States and Mexico. The trade agreement has long been a key driver of CAD fortunes and while we are still some way off a reformed accord this week’s progress goes a long way in easing fears talks will break down completely. The Canadian Dollar moved immediately higher following Monday’s announcement to reach two-month highs and up 0.6% as the USD/CAD saw 1.2955 the 100-day moving average.

However, despite upbeat trade expectations the CAD moved sharply lower after the month on month GDP growth stalled mid-week, printing below expectations and reducing the likelihood the Bank of Canada will raise rates again before years end.

For now, Loonie direction will remain tied to ongoing trade discussions and with significant challenges still to be resolved. Plus, there is still a strong possibility an agreement will not be reached before year end.

 

 

 

  Euro

The euro has surged the last number of weeks, particularly against the USD, long forgetting the 13-month lows that we endured. However, at the moment the euro is seemingly stuck between strong fundamentals and Italian uncertainty. Whilst it has bounced back due to USD weakness and a little support from German data, there is a sense of déjà vu for the Eurozone with regards to the latest news of political risk. The Eurozone seems unable to escape these sort of events and once again the risk has come from Italy. Following on from the elections earlier in the year, which ironically passed by without a lot of reaction or concern from the market, the fresh Italian coalition is causing headaches for the market with the expectation that its first budget could blow through the EU’s rules limiting public deficits to 3% of GDP. So far the selloff has only been in Italian debt and not the euro itself with Italian 10 year yields hitting 4 year highs.

However the big risk to the EUR at the moment came in the form of a denied report from the Italian deputy Prime Minister, that Italy had asked the ECB to help with it’s bond sales. The constant worry about the upcoming Italian budget is the risk that it could cripple Italy. This is because in order to fund the budget, Italy may have to unwind previous reforms which could hamper future Italian growth prospects (Italian growth is already dwindling). This growth needs all the help it can get because Italy contributes 12% of the EU’s total GDP (as well as 12% of its population – punching) which in turn creates concerns about the EU’s future growth prospects. The ECB recently said that the main risk to its plans is trade tensions but we believe that Italy is more of a worry. This also isn’t an event that is going to go away anytime soon, after all, we are talking about the 2019 budget.

 

 

 

  British Pound

Following on from the long weekend the theme for sterling is much like the previous week’s; no data so instead the pound was driven by reports and stories around Brexit. One reprieve for many sterling buyers who are worried that Brexit will weigh on the currency’s performance is the report that the Brexit deadline, originally penciled in for the 18th-19th October could be extended by four weeks. The dialogue between Barnier and new Brexit Secretary Dominic Raab was positive and whilst the extension is good news, the original deadline was in place to allow the EU Summit time to vote on the Brexit deal.

All that said, Politicians sometimes have a knack of unwinding all of hard work they have done in one short interview and later in the week it was the turn of Michel Barnier appearing after his very consolatory comments, but this time the tone was much more considered.

Barnier stated that the EU would be prepared for all options with the UK and that a ‘no deal’ Brexit is part of this planning. The pound wobbled but in general, it has managed to hold onto its gains made earlier in the week. August was meant to be a quiet month for the currency markets and the pound was bereft of any data for the last couple of weeks. GBP/USD and GBP/EUR have swung over 3.3% and 2.1% respectively over the last four weeks however with September just around the corner, the return of liquidity (following Labor Day) and the return of concrete data for investors to dig their teeth into volatility could increase.

 

 

 

  Australian Dollar

The AUD launched into last week cautiously, given the recent turmoil on the Australian Leadership front. The AUD had seen a drastic plunge following a frantic week of internal wrangling within the ruling Liberal-National coalition, in an attempt to avert a conservative-led move against then Prime Minister, Malcolm Turnbull. Despite narrowly clinging to power after an initial leadership vote, ultimately Turnbull he was ousted from office in a bitter party-room contest that ushered in the country’s sixth leader in the last decade, Scott Morrison. Mr. Morrison has pledged to “heal our party” after the party infighting and on the back of these statements and with the dust settling, the AUD saw a modest recovery to begin the week above 0.7319 versus the USD.

On the data front, the economic calendar was relatively quiet to close out the month of August, however, some key releases put pressure on the AUD. Starting at home, Private Capital Expenditures posted a nasty decline of 2.5% against an expected increase of 0.6%, implying slowing business investment in Australia. Further declines in building approvals with a reading of -5.2% against an expected decline of -2.2% also added fuel to the fire. Earlier in the week, Westpac also reported their mortgage rate increase which didn’t help concerns over the Australian economy either. The market rapidly unwound from its highs of 0.7362 earlier in the week and the AUD closed out the week below the 0.72 mark.

 

 

 

  New Zealand Dollar

The New Zealand dollar maintained a largely tight trading handle throughout last weeks opening sessions, fluctuating between intraday lows at 0.6669 and session highs at 0.6703. In the absence of headline data sets the NZD took advantage of broader USD weakness and an upturn in demand for risk. News the US and Mexico had agreed a new bilateral trade agreement, coupled with increased intervention from the PBOC helped fuel further dollar downside and a correction from 12-month highs touched just 2 weeks ago.

The New Zealand Dollar fell sharply through trade on Thursday, loosing almost 100 points and closing as the day’s worst performer. ANZ’s business confidence report showed corporate assuredness had collapsed to levels not seen since the 2008 financial crisis, which in turn fostered a decline in investment and employment intentions casting a cloud over near-term growth expectations. The poor print comes on the back of Dovish RBNZ currency prompting markets to increase expectations the monetary policy committee will cut the OCR within the next 12 months.

Plunging through 0.67 and 0.6650 losses were compounded by a broader market-wide, risk-off tone. Weakness across emerging markets, led by Argentina’s request to bring forward the release of specialised bailout funding, prompting a further run on other emerging market assets and wider flight to safety. The NZD/USD closed the week at 0.6621.

 

 

 

Posted by OFX

NAFTA negotiations, Australian leadership turmoil & Italian uncertainty

OFX Daily Market News

Posted by OFX

  Australian Dollar

The AUD launched into last week cautiously, given the recent turmoil on the Australian Leadership front. The AUD had seen a drastic plunge following a frantic week of internal wrangling within the ruling Liberal-National coalition, in an attempt to avert a conservative-led move against then Prime Minister, Malcolm Turnbull. Despite narrowly clinging to power after an initial leadership vote, ultimately Turnbull he was ousted from office in a bitter party-room contest that ushered in the country’s sixth leader in the last decade, Scott Morrison. Mr. Morrison has pledged to “heal our party” after the party infighting and on the back of these statements and with the dust settling, the AUD saw a modest recovery to begin the week above 0.7319 versus the USD.

On the data front, the economic calendar was relatively quiet to close out the month of August, however, some key releases put pressure on the AUD. Starting at home, Private Capital Expenditures posted a nasty decline of 2.5% against an expected increase of 0.6%, implying slowing business investment in Australia. Further declines in building approvals with a reading of -5.2% against an expected decline of -2.2% also added fuel to the fire. Earlier in the week, Westpac also reported their mortgage rate increase which didn’t help concerns over the Australian economy either. The market rapidly unwound from its highs of 0.7362 earlier in the week and the AUD closed out the week below the 0.72 mark.

 

 

 

  New Zealand Dollar

The New Zealand dollar maintained a largely tight trading handle throughout last weeks opening sessions, fluctuating between intraday lows at 0.6669 and session highs at 0.6703. In the absence of headline data sets the NZD took advantage of broader USD weakness and an upturn in demand for risk. News the US and Mexico had agreed a new bilateral trade agreement, coupled with increased intervention from the PBOC helped fuel further dollar downside and a correction from 12-month highs touched just 2 weeks ago.

The New Zealand Dollar fell sharply through trade on Thursday, loosing almost 100 points and closing as the day’s worst performer. ANZ’s business confidence report showed corporate assuredness had collapsed to levels not seen since the 2008 financial crisis, which in turn fostered a decline in investment and employment intentions casting a cloud over near-term growth expectations. The poor print comes on the back of Dovish RBNZ currency prompting markets to increase expectations the monetary policy committee will cut the OCR within the next 12 months.

Plunging through 0.67 and 0.6650 losses were compounded by a broader market-wide, risk-off tone. Weakness across emerging markets, led by Argentina’s request to bring forward the release of specialised bailout funding, prompting a further run on other emerging market assets and wider flight to safety. The NZD/USD closed the week at 0.6621.

 

 

 

  British Pound

Following on from the long weekend the theme for sterling is much like the previous week’s; no data so instead the pound was driven by reports and stories around Brexit. One reprieve for many sterling buyers who are worried that Brexit will weigh on the currency’s performance is the report that the Brexit deadline, originally penciled in for the 18th-19th October could be extended by four weeks. The dialogue between Barnier and new Brexit Secretary Dominic Raab was positive and whilst the extension is good news, the original deadline was in place to allow the EU Summit time to vote on the Brexit deal.

All that said, Politicians sometimes have a knack of unwinding all of hard work they have done in one short interview and later in the week it was the turn of Michel Barnier appearing after his very consolatory comments, but this time the tone was much more considered.

Barnier stated that the EU would be prepared for all options with the UK and that a ‘no deal’ Brexit is part of this planning. The pound wobbled but in general, it has managed to hold onto its gains made earlier in the week. August was meant to be a quiet month for the currency markets and the pound was bereft of any data for the last couple of weeks. GBP/USD and GBP/EUR have swung over 3.3% and 2.1% respectively over the last four weeks however with September just around the corner, the return of liquidity (following Labor Day) and the return of concrete data for investors to dig their teeth into volatility could increase.

 

 

 

  United States Dollar

The highlight of last week’s opening sessions for the USD was the news that the US and Mexico have reached an understanding on trade and taken the first step to a new free-trade agreement to replace NAFTA. Canada, the other original party, is also set to join negotiations, although Trump was somewhat dismissive of this, saying “we’ll see” to the suggestion. Overall, equity markets rallied across the US after the announcement although the Greenback conversely suffered. The impetus for the fall may be the increasing rhetoric from Trump on his primary trade war target. The new understanding with Mexico and moratorium on the EU tariffs have led speculators to believe Trump is shoring up relationships and focusing all his attention on the world’s second-biggest economy, China. Tellingly, Trump commented in a speech in West Virginia that “China was on the way to be bigger than us in a short period of time. That’s not going to happen anymore”. The declines are likely also impacted from the unwinding of aggregate long positions taken by speculators, with many forces conspiring to precipitate the falls, such as the dovish Fed statement and China’s active steps to stabilize the CNY.

Last week also saw a slew of economic data out for the US, continuing jobless claims posted a 1708k better than last weeks 1728K. Core PCE Price index YoY and MoM both printed a notch higher at 2.3% and 0.1% respectively. Personal income hit consensus of 0.3% while personal spending MoM was just above consensus of 0.35 and printed a 0.4%. Initial jobless claim rose slightly to 213K for last weeks print of 210K.

 

 

 

  Euro

The euro has surged the last number of weeks, particularly against the USD, long forgetting the 13-month lows that we endured. However, at the moment the euro is seemingly stuck between strong fundamentals and Italian uncertainty. Whilst it has bounced back due to USD weakness and a little support from German data, there is a sense of déjà vu for the Eurozone with regards to the latest news of political risk. The Eurozone seems unable to escape these sort of events and once again the risk has come from Italy. Following on from the elections earlier in the year, which ironically passed by without a lot of reaction or concern from the market, the fresh Italian coalition is causing headaches for the market with the expectation that its first budget could blow through the EU’s rules limiting public deficits to 3% of GDP. So far the selloff has only been in Italian debt and not the euro itself with Italian 10 year yields hitting 4 year highs.

However the big risk to the EUR at the moment came in the form of a denied report from the Italian deputy Prime Minister, that Italy had asked the ECB to help with it’s bond sales. The constant worry about the upcoming Italian budget is the risk that it could cripple Italy. This is because in order to fund the budget, Italy may have to unwind previous reforms which could hamper future Italian growth prospects (Italian growth is already dwindling). This growth needs all the help it can get because Italy contributes 12% of the EU’s total GDP (as well as 12% of its population – punching) which in turn creates concerns about the EU’s future growth prospects. The ECB recently said that the main risk to its plans is trade tensions but we believe that Italy is more of a worry. This also isn’t an event that is going to go away anytime soon, after all, we are talking about the 2019 budget.

 

 

 

  Canadian Dollar

Last week’s opening sessions saw the loonie reacted positively, on news that there was a bilateral agreement between the United States and Mexico. The trade agreement has long been a key driver of CAD fortunes and while we are still some way off a reformed accord this week’s progress goes a long way in easing fears talks will break down completely. The Canadian Dollar moved immediately higher following Monday’s announcement to reach two-month highs and up 0.6% as the USD/CAD saw 1.2955 the 100-day moving average.

However, despite upbeat trade expectations the CAD moved sharply lower after the month on month GDP growth stalled mid-week, printing below expectations and reducing the likelihood the Bank of Canada will raise rates again before years end.

For now, Loonie direction will remain tied to ongoing trade discussions and with significant challenges still to be resolved. Plus, there is still a strong possibility an agreement will not be reached before year end.

 

 

 

Posted by OFX

AUD struggles to hold onto 0.73 handle as new ranges form

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar finds itself below the 0.73 handle again after another horrendous day backed by trade war concerns. Opening this morning at 0.7262, the Aussie was also unsupported by domestic news with Westpac’s mortgage rate hike, weaker Capex and falling building approvals all conspiring to add to the sell off.

Starting at home, Private Capital Expenditures posted a nasty decline of 2.5% against an expected increase of 0.6%, implying slowing business investment in Australia. Rounding out a rough day for the Australian economy was further declines in building approvals with a reading of -5.2% against an expected decline of -2.2%. Earlier in the week, Westpac also reported their mortgage rate increase which didn’t help concerns over the Australian economy either. The market rapidly unwound from its highs of 0.7362 earlier in the week.

Adding fuel to the fire however was further comments from President Trump who outlined his commitment to further Tariffs on China. Market optimism that a reconciliation was around the corner quickly evaporated as Trump put those thoughts to bed. The risk-on sentiment quickly shifted to risk-off with emerging markets and commodity currencies bearing the brunt of investor concern.

The Australian Dollar now limps to the close of the week with little on the economic calendar to digest. All eyes will be fixed on the Headlines for direction moving into September.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0880 – 1.1020

The New Zealand Dollar fell sharply through trade on Thursday, loosing almost 100 points and closing the days worst performer. ANZ’s business confidence report showed corporate assuredness had collapsed to levels not seen since the 2008 financial crisis, which in turn fostered a decline in investment and employment intentions casting a cloud over near-term growth expectations. The poor print comes on the back of Dovish RBNZ currency prompting markets to increase expectations the monetary policy committee will cut the OCR within the next 12 months.

Plunging through 0.67 and 0.6650 losses were compounded by a broader market wide risk off tone. Weakness across emerging markets, led by the Argentina’s request to bring forward the release of specialised bailout funding, prompting a further run on other emerging market assets and wider flight to safety. The move toward haven assets saw the NZD touch intraday lows at 0.6635 and with little of note on the macroeconomic docket Friday attentions and direction remain influenced by ongoing fluctuations in risk appetite.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7750 – 1.8050

The Great British Pound enjoyed sustained upward momentum through trade on Thursday as rhetoric from Europe and London suggests a bespoke deal can be reached. The Pound largely held onto moves above 1.30 briefly edging lower as broader risk-off sentiment drove the USD higher.

Sterling touched one-week highs against the Euro forcing the 19-nation single currency back below 0.90 pence as markets garnered fresh hopes a “no-deal” Brexit will be avoided following comments from top Negotiators. The comments have added to recent GBP volatility making it increasingly expensive for sterling bears to hold short positions with the more aggressive shorts unwound helping to consolidate the recent upturn. That said, despite the shift in rhetoric this week a definitive Brexit deal is still some way off and the spectra of a no deal divorce continues to cap upside moves.

Attentions today remain with ongoing Brexit developments.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7205 – 0.7350

The United States Dollar finds itself in positive territory for the first time this week as President Trump outlined another escalation over the trade war with China. The US Dollar Index opens this morning at 94.70, a marginal increase of 0.18% across a basket of currencies.

It what was an otherwise slow day on the economic calendar, the US Core PCE Deflator for July came in at 2% y/y as widely expected, barely registering with investors. The heavy hitting impact came from its usual source this year with President Trump announcing that the next round of US tariffs on China will be proceeding unimpeded. Markets reacted as expected with emerging market currencies depreciating significantly on the news. Safe-haven currencies such as the Swiss Franc, Japanese Yen and US Dollar all appreciated against their counterparts, highlighting market concerns over the trade spat. Adding to the concerns was Argentina, with President Macri’s surprise request to the IMF to speed up its release of their $50bn bailout package. In what is an alarming development, Argentina’s 60% interest rates have failed to stem the depreciation, exacerbating concerns on emerging markets and supporting the US Dollar.

The Greenback now turns its attention to another quiet day on the economic calendar with the focus squarely placed on the headlines.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6180 – 0.6280

The Euro held above the 1.17 handle during the Asian session on Thursday however, as the European markets opened the pair was unable to hold on and saw a steady decline down to 1.6417 vs the U.S Dollar. The catalyst behind the move was a drop in EU Business and Consumer Confidence numbers, the survey reported economic confidence dropped to 111.6 in August which was worse than expected of 111.9. Confidence numbers have been declining for the past few months after topping a high of 115.3 in January. The business climate indicator also weakened from 1.30 to 1.22. Meanwhile, consumer confidence was unrevised at -1.9 but still down from the -0.5 reading in July.

Meanwhile, German unemployment numbers for August remained unchanged at 5.2%, the rate has been steady now for the past 3 months.

Looking ahead all eyes will be focused on the preliminary inflation data for August which is out later today. Inflation data is forecast to show a 2.1% rise in broad inflation and 1.1% in core inflation which leaves out volatile food and fuel components compared to a year ago. The Eurozone unemployment rate in July will also be released at the same time, and is forecast to show a 8.2% rise from 8.3% previously. A stronger-than-expected unemployment print would also be expected to impact positively on the Euro as it reflects a healthier economy, which makes foreign investors more likely to invest in the region, increasing inflows and therefore demand for the currency.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9380 – 0.9480

The Canadian Dollar slipped back below 0.77 through trade on Thursday despite ongoing and increasing optimism surrounding NAFTA negotiations. Talks between the US and Canada are reportedly progressing quickly and there is still an open possibility an in-principal agreement will be found before the US imposed deadline this week.

Despite upbeat trade expectations the CAD moved sharply lower after month on month GDP growth stalled, printing below expectations and reducing the likelihood the Bank of Canada will raise rates again before years end. Consolidating moves below 0.7750 the loonie edged below 0.77 to touch 0.7692 as broader risk-off sentiment forced a shift toward haven assets, driving the USD higher.

With little of note on the economic docket into the weekly close attentions remain squarely focused on ongoing trade discussions.

 

 

 

Posted by OFX

Greenback Rises as Risk Appetite Wanes

OFX Daily Market News

Posted by OFX

  United States Dollar

The United States Dollar finds itself in positive territory for the first time this week as President Trump outlined another escalation over the trade war with China. The US Dollar Index opens this morning at 94.80, a marginal increase of 0.18% across a basket of currencies.

It what was an otherwise slow day on the economic calendar, the US Core PCE Deflator for July came in at 2% y/y as widely expected, barely registering with investors. The massive hitting impact came from its usual source this year with President Trump announcing that the next round of US tariffs on China will be proceeding unimpeded. Markets reacted as expected with emerging market currencies depreciating significantly on the news. Safe-haven currencies such as the Swiss Franc, Japanese Yen and US Dollar all appreciated against their counterparts, highlighting market concerns over the trade spat. Adding to the worries was Argentina, with President Macri’s surprise request to the IMF to speed up its release of their $50bn bailout package. In what is an alarming development, Argentina’s 60% interest rates have failed to stem the depreciation, exacerbating concerns on emerging markets and supporting the US Dollar.

The Greenback now turns its attention to the economic calendar, with Michigan Consumer Sentiment and Expectations. Baker Hughes Oil Rig Count is reported in the early afternoon count is expected to remain unchanged at 860. The focus of market participants is squarely placed on the headlines on global trade.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.2971-1.3048

The Canadian Dollar slipped back below 0.77 through trade on Thursday despite ongoing and increasing optimism surrounding NAFTA negotiations. Talks between the US and Canada are reportedly progressing quickly, and there is still an open possibility an in-principal agreement will be found before the US imposed deadline this week.

Despite upbeat trade expectations the CAD moved sharply lower after the month on month GDP growth stalled, printing below expectations and reducing the likelihood the Bank of Canada will raise rates again before years end. Consolidating moves below 0.7750 the loonie edged below 0.77 to touch 0.7692 as broader risk-off sentiment forced a shift toward haven assets, driving the USD higher.

On the economic docket to close the week we have Producer Price Index figures and Raw Material Prices out this morning, market participants have factored in a slight uptick for each. After the data investors, attention will remain squarely focused on ongoing trade discussions.

 

 

 

  Euro

EUR / USD Expected Range: 1.1637-1.1690

During the Asian trade on Thursday, the EUR/USD further declined to carry losses from the previous North America session. As we saw the European markets open we had the release of German GfK Consumer Climate and the Euro was dragged further touching a low 1.1652. The survey showed that mood among German shoppers had deteriorated unexpectedly for the second month in a row heading into September. The GfK research institute said its consumer sentiment indicator, based on a survey of around 2,000 Germans, fell to 10.5 going into September from 10.6 a month earlier casting some doubt about the strength of a consumer-led upswing in Europe’s largest economy.

German Import Prices released at 5% better than previous, but below expectations. Preliminary German CPI remains flat y/y at 2%. German unemployment change print -8K worse than forecasts of +5K, German unemployment rate remains at the 5.2%. The EUR remains close to the 1.17 handle against the USD and 1.51 level against the CAD.

The drop, however, was short-lived as we saw sentiment improve in the markets and the US dollar Index pullback. Despite US GDP figures recording growth for the June quarter coming in at 4.2% the EUR/USD pushed through resistance levels of 1.17 and reached a high of 1.1718.

German Import Prices released at 5% better than previous, but below expectations. Preliminary German CPI remains flat y/y at 2%. German unemployment change print -8K worse than forecasts of +5K, German unemployment rate remains at the 5.2%. The EUR remains close to the 1.17 handle against the USD and 1.51 level against the CAD.

 

 

 

  British Pound

GBP / USD Expected Range: 1.2967-1.3029

The Great British Pound enjoyed sustained upward momentum through trade on Thursday as rhetoric from Europe and London suggests a bespoke deal can be reached. The Pound largely held onto moves above 1.30 briefly edging lower as broader risk-off sentiment drove the USD higher.

Sterling touched one-week highs against the Euro forcing the 19-nation single currency back below 0.90 pence as markets garnered fresh hopes a “no-deal” Brexit will be avoided following comments from top Negotiators. The comments have added to recent GBP volatility making it increasingly expensive for sterling bears to hold short positions with the more aggressive shorts unwound helping to consolidate the current upturn. That said, despite the shift in rhetoric this week a final Brexit deal is still some way off, and the spectra of a no deal divorce continues to cap upside moves.

Attention today remain with ongoing Brexit developments.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7219-.07268

The Australian Dollar finds itself below the 0.73 handle again after another horrendous day backed by trade war concerns. Opening this morning at 0.7226, the Aussie was also unsupported by domestic news with Westpac’s mortgage rate hike, weaker Capex and falling building approvals all conspiring to add to the selloff.

Starting at home, Private Capital Expenditures posted a nasty decline of 2.5% against an expected increase of 0.6%, implying slowing business investment in Australia. Rounding out a rough day for the Australian economy was further declines in building approvals with a reading of -5.2% against an expected decline of -2.2%. Earlier in the week, Westpac also reported their mortgage rate increase which didn’t help concerns over the Australian economy either. The market rapidly unwound from its highs of 0.7362 earlier in the week.

Adding fuel to the fire, however, was further comments from President Trump who outlined his commitment to additional Tariffs on China. Market optimism that reconciliation was around the corner quickly evaporated as Trump put those thoughts to bed. The risk-on sentiment promptly shifted to risk-off with emerging markets and commodity currencies bearing the brunt of investor concern. The Australian Dollar now limps to the close of the week with little on the economic calendar to digest. All eyes will be fixed on the Headlines for direction moving into September.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6625-0.6662

The New Zealand Dollar fell sharply through trade on Thursday, loosing almost 100 points and closing the days worst performer. ANZ’s business confidence report showed corporate assuredness had collapsed to levels not seen since the 2008 financial crisis, which in turn fostered a decline in investment and employment intentions casting a cloud over near-term growth expectations. The poor print comes on the back of Dovish RBNZ currency prompting markets to increase expectations the monetary policy committee will cut the OCR within the next 12 months.

Plunging through 0.67 and 0.6650, losses were compounded by a broader market-wide risk-off tone. Weakness across emerging markets, led by Argentina’s request to bring forward the release of specific bailout funding, prompting a further run on other emerging market assets and broader flight to safety. The move toward haven assets saw the NZD touch intraday lows at 0.6635, and with little of note on the macroeconomic docket, Friday attentions and direction remain influenced by ongoing fluctuations in risk appetite.

 

 

 

Posted by OFX

AUD under pressures as banks move on interest rates

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar opens this morning as one of the worst performing currencies in overnight trading, shedding 45 points to 0.73. The Aussie did recover slightly however, to open this morning at 0.7308 after commodity prices and a softening USD supported the Aussie somewhat.

The catalyst for the fall was driven by Westpac’s decision to raise variable mortgage rates by 14bps, the first of the four major banks to do so. Westpac cited short-end funding costs as the reason for the increase with the BBSW rising 16bps in the 3-month bank bill market. Australian markets responded almost immediately with bond markets also feeling the pinch. Analysts suggest the fall may have implications on the RBA’s interest rate guidance with an even slimmer chance of an interest rate hike now on the cards. Currently, the first hike is now priced for Q3 of 2020.

It wasn’t all negative news for the Aussie however with a stark recovery in commodity prices driving demand for the currency. While only marginally affecting the Aussie, the currency did manage to hold above the 0.73 mark with the support of commodity markets. Demand for the Pair was also heightened as market concerns over a tariff ridden world slowly subside on the news that the US is brokering new deals in North America. The news supported a risk-on market sentiment that saw demand for the Aussie continue to build. Nevertheless, none of the news could help the Aussie too much as it opens this morning firmly focused on interest rates.

The Aussie now turns to Private Capital Expenditure and further headlines to drive direction this Thursday.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0810 – 1.0980

The New Zealand dollar maintained a largely tight trading band through Wednesday, edging back below 0.67 before rallying into the close. Having held onto moves above resistance at 0.67 for much of the Australasian session the NZD followed its antipodean counterpart lower touching intraday lows at 0.6685. News Westpac will raise Australian home owners variable mortgage rates by 14bps surprised markets and forced the AUD sharply lower as the RBA will likely now extend its period of neutral monetary policy through H1 next year. The NZD surged against the AUD, advancing some 7- points to test 0.92.

Attentions now turn to ANZ business confidence report. A soft read will only further dampen business investment and consumption expectations and do little to force the RBNZ to reconsider its current policy setting. We expect the NZD will continue to meet selling pressure on moves approaching 0.6750 with support through the short term holding at 0.6560.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7610 – 1.7980

The Great British Pound rallied through trade on Wednesday outperforming all other G10 counterparts following optimistic commentary from EU negotiators. Chief EU mediator Michael Barnier said the EU was prepared to offer the UK a deal that is does not have with other trading partners, a deal that would include an “ambitious free trade agreement”. While the comments were caveated with the usual warnings they offer investors a reprieve from the recent diatribe of rhetoric hinting toward a “ No Deal Divorce”. Sterling surged back through psychological resistance at 1.30 to touch 1.3032.

While the market Is likely to remain nervous until greater clarity and specifics are available the latest comments provide renewed hope a deal can be struck and given then heavy shorting of GBP positions through the last month enabled the strong market response yesterday.

With little of note on the macroeconomic docket today attentions turn to ongoing Brexit chatter for direction moving forward. Should optimism hold we would expect Sterling to maintain moves above 1.30 through the short term.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7205 – 0.7350

The United States Dollar opens marginally lower against a basket of currencies, opening this morning at 94.54 on the US Dollar Index. The Greenback enjoyed an uneventful day with little to excite markets with the focus firmly fixed on on-going trade discussions.

The day did have a few notable releases with quarter on quarter preliminary GDP posting a better than expected result of 4.2%. Crude Oil inventories also fell further to -2.6m barrels reflecting the growth and inflationary pressures in the US economy. Despite the positive economic news, the Greenback did very little as the focus remained on on-going trade talks. With the US-China trade war looming in the background, the market focused primarily on the revised NAFTA dialogues in North America. Markets reacted positively to the news that Canada and the US were approaching a deal, further strengthening the risk-on environment seen throughout the week. Ultimately however, it was a day of minimal volatility.

The Greenback continues its quiet week into Thursday with little to drive momentum for investors. Again attentions remain fixed on on-going trade talks and the headlines.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6180 – 0.6280

During the Asian trade on Thursday the EUR/USD further declined carrying losses from the previous North America session. As we saw the European markets open came the release of German GfK Consumer Climate and the Euro was dragged further touching a low 1.1652. The survey showed that mood among German shoppers has deteriorated unexpectedly for the second month in a row heading into September. The GfK research institute said its consumer sentiment
indicator, based on a survey of around 2,000 Germans, fell to 10.5 going into September from 10.6 a month earlier casting some doubt about the strength of a consumer-led upswing in Europe’s largest economy.

The drop however was short-lived as we saw sentiment improve in the markets and the US dollar Index pullback. Despite US GDP figures recording growth for the June quarter coming in at 4.2% the EUR/USD pushed through resistance levels of 1.17 and is currently changing hands at 1.1707 at the time of writing.

Looking ahead, German Import Prices, Preliminary German CPI and Spanish Flash CPI is all due later today.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9380 – 0.9510

The Canadian Dollar maintained a largely tight trading band throughout Wednesday as investors squared positions while trade talks continue to move forward. Following the weeks earlier bilateral trade agreement between eh US and Mexico the Loonie found support on renewed hopes a NAFTA deal could be struck before to long and ongoing talks seeming support such optimism as a tri lateral trade agreement looms ever closer.

Friday remains a crucial tipping point in the current round of negotiations. President Trump marked Friday as a deadline for all three parties to reach an in-principal deal, however while possible it seems unlikely as Canada will not be bullied into a trade pact it feels is unbalanced. With any new pact requiring at least 90 days to pass through congress before being ratified it is unlikely we will see a full scale reform before year end.

Attentions remain with ongoing negotiations with long term direction keenly dependent on the outcome of future trade agreements.

 

 

 

Posted by OFX

Dollar Index is Little Changed and Holding

OFX Daily Market News

Posted by OFX

  United States Dollar

The United States Dollar opens mixed against a basket of currencies, beginning this morning at 94.60 on the US Dollar Index which is a no change reading. The Greenback enjoyed an uneventful day yesterday with little to excite markets with the focus firmly fixed on on-going trade discussions.

The day did have a few notable releases with the quarter on quarter preliminary GDP posting a better than expected result of 4.2%. Crude Oil inventories also fell further to -2.6m barrels reflecting the growth and inflationary pressures in the US economy. Despite the positive economic news, the Greenback did very little as the focus remained on on-going trade talks. With the US-China trade war looming in the background, the market focused primarily on the revised NAFTA dialogues in North America. Markets reacted positively to the news that Canada and the US were approaching a deal, further strengthening the risk-on environment seen throughout the week.

This morning we have had a slew of economic data out for the US, continuing jobless claims posted a 1708k better than last weeks 1728K. Core PCE Price index YoY and MoM both printed a notch higher at 2.3% and 0.1% respectively. Personal income hit consensus of 0.3% while personal spending MoM was just above consensus of 0.35 and printed a 0.4%. Initial jobless claim rose slightly to 213K for last weeks print of 210K. Market participant attentions will remain fixed on on-going trade talks and the headlines.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.2903– 1.3029

The Canadian Dollar maintained a mostly tight trading band throughout the overnight as investors squared positions while trade talks continue to move forward. Following the weeks earlier bilateral trade agreement between the US and Mexico, the Loonie found support on renewed hopes a NAFTA deal could be inked before the Labor Day long weekend.

Friday remains a crucial tipping point in the current round of negotiations. President Trump marked Friday as a deadline for all three parties to reach an in-principal deal, however, while possible it seems unlikely as Canada will not be bullied into a trade pact it feels is unbalanced. With any new agreement, the US requires at least 90 days to pass it into law through Congress; it is unlikely we will see a full-scale reform before year end.

Canadian economic data this morning saw the GDP annualized growth rate for Q2 print a 2.4% just over forecasts of 2.3%. GDP M/M was flat. The loonie fell half a percentage point at the release.

 

 

 

  Euro

EUR / USD Expected Range: 1.1627-1.1695

During the Asian trade on Thursday, the EUR/USD further declined to carry losses from the previous North America session. As we saw the European markets open we had the release of German GfK Consumer Climate and the Euro was dragged further touching a low 1.1652. The survey showed that mood among German shoppers had deteriorated unexpectedly for the second month in a row heading into September. The GfK research institute said its consumer sentiment indicator, based on a survey of around 2,000 Germans, fell to 10.5 going into September from 10.6 a month earlier casting some doubt about the strength of a consumer-led upswing in Europe’s largest economy.

German Import Prices released at 5% better than previous, but below expectations. Preliminary German CPI remains flat y/y at 2%. German unemployment change print -8K worse than forecasts of +5K, German unemployment rate remains at the 5.2%. The EUR remains close to the 1.17 handle against the USD and 1.51 level against the CAD.

The drop, however, was short-lived as we saw sentiment improve in the markets and the US dollar Index pullback. Despite US GDP figures recording growth for the June quarter coming in at 4.2% the EUR/USD pushed through resistance levels of 1.17 and reached a high of 1.1718.

German Import Prices released at 5% better than previous, but below expectations. Preliminary German CPI remains flat y/y at 2%. German unemployment change print -8K worse than forecasts of +5K, German unemployment rate remains at the 5.2%. The EUR remains close to the 1.17 handle against the USD and 1.51 level against the CAD.

 

 

 

  British Pound

GBP / USD Expected Range: 1.2990-1.3043

The GBP/USD wobbled in early London trade as it rallied to touch 1.2934 before fizzling out and leading cable lower on the day at 1.2845. A newspaper report indicating that BoE governor Carney has been asked by the government to stay on an extra year to provide stability in the year after UK treasury denied Brexit.

Robust second-tier data out of the US ensured the London session highs were short-lived as the greenback strengthened against all majors. Although the data was second-tier, it reinforced the narrative that healthy growth is continuing in the US economy while price pressures also appear to be easing.

Brexit noise continues to plague the GBP with downside GBP/USD supports below the daily low of 1.2860 and 1.2835 with topside resistance in the 1.2895 and 1.2930 areas.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7275-.07315

The Australian Dollar opens this morning as one of the worst performing currencies in the North American session shedding 45 points to 0.73. The Aussie never recovered in the Asian session and drop to a low .7275, However, it looks to open this morning at the 0.73 handle, after commodity prices and a softening USD support the Aussie somewhat.

The catalyst for the fall was driven by Westpac’s decision to raise variable mortgage rates by 14bps, the first of the four major banks to do so. Westpac cited short-end funding costs as the reason for the increase with the BBSW rising 16bps in the 3-month bank bill market. Australian markets responded almost immediately with bond markets also feeling the pinch. Analysts suggest the fall may have implications on the RBA’s interest rate guidance with an even slimmer chance of an interest rate hike now on the cards. Currently, the first hike is now priced for Q3 of 2020.

It wasn’t all negative news for the Aussie however with a stark recovery in commodity prices driving demand for the currency. While only marginally affecting the Aussie, the currency did manage to hold above the 0.73 mark with the support of commodity markets. Demand for the Pair was also heightened as market concerns over a tariff ridden world slowly subside on the news that the US is brokering new deals in North America. The news supported a risk-on market sentiment that saw demand for the Aussie continue to build. Nevertheless, none of the news could help the Aussie too much as it opens this morning firmly focused on interest rates.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6645-0.6717

The New Zealand dollar maintained a mostly tight trading band through Wednesday, edging back below 0.67 before rallying into the close. Having held onto moves above resistance at 0.67 for much of the Asian session, the NZD followed its antipodean counterpart lower touching intraday lows at 0.6685. News Westpac will raise Australian homeowners variable mortgage rates by 14bps surprised markets and forced the AUD sharply lower as the RBA will likely now extend its period of neutral monetary policy through H1 next year. The NZD surged against the AUD, advancing some 7- points to test 0.92.

Attentions now turn to ANZ business confidence report. A soft read will only further dampen business investment and consumer expectations and do little to force the RBNZ to reconsider its current policy setting. We expect the NZD will continue to meet selling pressure on moves approaching 0.6750 with support through the short term holding at 0.6560.

 

 

 

Posted by OFX

US GDP Q2 Expected at 4% posts a 4.2% Growth Rate

OFX Daily Market News

Posted by OFX

  United States Dollar

The United States Dollar consolidated its position for much of Tuesday as the quiet economic calendar left investors to ponder the recent US-Mexico trade deal. With the US Dollar Index (DXY) opening this morning at 94.72, the general tone of the USD remains consistent with the start of the week.

The US-Mexico Trade deal continues to dominate market sentiment in the absence of any new headlines or data. The positive news saw investors shift gears and support a ‘risk-on’ mood in global markets. While the currency movements have been modest, the market nevertheless, continued favoring USD counterparts as it awaits further news from the US-China trade front.

Market Participant attention no turns to Preliminary GDP Quarter on Quarter numbers and the Crude Oil Inventories for direction, while keeping a close eye on the headlines. US GDP Q2 expected at 4% posts a 4.2% growth rate.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.2890 – 1.2987

The Canadian Dollar rallied through trade on Tuesday, buoyed by news the US and Mexico had reached a bilateral trade agreement bolstering hopes the three-way trade pact, NAFTA, can be reformed. The Loonie pushed through 0.7750 after President Trump and Pena Nieto announced a preliminary agreement that solved many of the open issues and opens the door engaging Canada on broader NAFTA discussions.

The Tri-lateral trade agreement has long been a key driver of CAD fortunes and while we are still some way off a reformed accord this week’s progress goes a long way in easing fears talks will break down completely. Loonie direction will remain tied to ongoing trade discussions and with significant challenges still to be resolved there is still a strong possibility an agreement will not be reached before year end.

Attention today turn to the Current Account balance ahead of tomorrow’s all-important monthly GDP print. Canadian current account balance prints -15.88B, while expectations were for -19.5B inline with previous monthly numbers. The loonie had a slight uptick against its trading peers.

 

 

 

  Euro

EUR / USD Expected Range: 1.1653-1.1700

The euro at the moment is trading on the back of strong fundamentals and Italian uncertainty. While it has bounced back against the USD over the last few weeks due to USD weakness and a little support from German data, there is a sense of déjà vu for the Eurozone with regards to the latest news of political risk. The Eurozone seems unable to escape these sort of events, and once again the threat has come from Italy. Following on from the elections earlier in the year, which ironically passed by without a lot of reaction or concern from the market, the current Italian coalition is causing headaches for the market with the expectation that its first budget could blow through the EU’s rules limiting public deficits to 3% of GDP. So far, the selloff has only been in Italian debt and not the euro itself with Italian ten-year yields hitting four-year highs.

The next point of resistance is the July 31st highs of 1.1750 and support is sitting at 1.1660.

 

 

 

  British Pound

GBP / USD Expected Range: 1.2845-1.2901

The GBP/USD wobbled in early London trade as it rallied to touch 1.2934 before fizzling out and leading cable lower on the day at 1.2845. A newspaper report indicating that BoE governor Carney has been asked by the government to stay on an extra year to provide stability in the year after UK treasury denied Brexit.

Robust second-tier data out of the US ensured the London session highs were short-lived as the greenback strengthened against all majors. Although the data was second-tier, it reinforced the narrative that healthy growth is continuing in the US economy while price pressures also appear to be easing.

Brexit noise continues to plague the GBP with downside GBP/USD supports below the daily low of 1.2860 and 1.2835 with topside resistance in the 1.2895 and 1.2930 areas.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7291-0.7346

The Australian Dollar is steady this morning when valued against the US Dollar in what was a quiet night on currency markets. The Aussie reached a high of 0.7348 in the Asian session on the back of broad greenback weakness.

On the data front today, we had the release of Housing Industry Association (HIA) New Home Sales data for July sale rose 2.2%. Tomorrow the Australian Bureau of Statistics will release private sector capex data for the June quarter which is expected to rise 0.9%, leaving annual growth at 3.5%. On Thursday there’s also data on July building approvals.

From a technical perspective, the AUD/USD pair is currently trading at 0.7295. We continue to expect support to hold at these levels at the 0.7300 handle, while now any upward push will likely meet resistance around 0.7360.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6690-0.6719

he New Zealand dollars advance continued through trade on Tuesday extending beyond 0.67 as investors took advantage of broader US dollar weakness. Having flirted with moves above the 0.67 handle since Friday, the NZD pushed through to intraday highs at 0.6719 on renewed demand for risk appetite.

The Kiwi was buoyed by news the US and Mexico had reached an accord that would overhaul and replace the existing NAFTA agreement. While merely a bilateral agreement at this point it goes a long way to easing trade-related concerns and has prompted investors to unwind safe haven plays, bolstering demand for the New Zealand dollar.

Despite the renewed surge in risk appetite and break beyond resistance we still expect ongoing upside pressure on extended NZD rallies. A push toward 0.68 in the current environment will likely prompt profit taking as the gap between central bank interest rates and the outlook for monetary policy continues to weigh on the Kiwi. Attentions this week remain with Thursday Business Confidence print with interim direction driven by risk appetite flows.

 

 

 

Posted by OFX

Aussie steady against US dollar

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar is steady this morning when valued against the US Dollar in what was a quiet night on currency markets. The Aussie reached a high of 0.7362 overnight on the back of broad dollar’s weakness and a strong momentum in US equities. The S&P 500 briefly touched 2,900.

On the data front today we will see the release of Housing Industry Association (HIA) New Home Sales data for July. Tomorrow the Australian Bureau of Statistics will release private sector capex data for the June quarter which is expected to rise 0.9%, leaving annual growth at 3.5%. On Thursday there’s also data on July building approvals.

From a technical perspective, the AUD/USD pair is currently trading at 0.7334. We continue to expect support to hold on moves approaching 0.7300 while now any upward push will likely meet resistance around 0.7360.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0860 – 1.1040

The New Zealand dollars advance continued through trade on Tuesday extending beyond 0.67 as investors took advantage of broader US dollar weakness. Having flirted with moves above the 0.67 handle since Friday the NZD pushed through to intraday highs at 0.6727 on renewed demand for risk appetite.

The Kiwi was buoyed by news the US and Mexico had reached an accord that would overhaul and replace the existing NAFTA agreement. While merely a bilateral agreement at this point it goes a long way to easing trade related concerns and has prompted investors to unwind safe haven plays, bolstering demand for the New Zealand dollar.

Despite the renewed surge in risk appetite and break beyond resistance we still expect ongoing upside pressure on extended NZD rallies. A push toward 0.68 in the current environment will likely prompt profit taking as the gap between central bank interest rates and outlook for monetary policy continues to weigh on the Kiwi. Attentions this week remain with Thursday Business Confidence print with interim direction driven by risk appetite flows.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7410 – 1.7680

The GBP/USD wobbled in early London trade is it rallied to touch 1.2934 before fizzling out and leaving the cable a toucher lower on the day at 1.2870. A newspaper report indicating that BoE governor Carney has been asked by the government to stay on an extra year in an effort to provide stability in the year after Brexit was denied by UK treasury.

Strong second tier data out of the US ensured the London session highs were short-lived as the greenback strengthened against all majors. Although the data was second tier, it reinforced the narrative that sound growth is continuing in the US economy whilst price pressures also appear to be easing.

Brexit noise continues to plague the GBP with downside GBP/USD supports below the daily low of 1.2860 and 1.2835 with topside resistance in the 1.2895 and 1.2930 areas.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7205 – 0.7380

The United States Dollar consolidated its position for much of Tuesday as the quiet economic calendar left investors to ponder the recent US-Mexico trade deal. With the US Dollar Index (DXY) opening this morning at 94.72, the general tone of the USD remains consistent with the start of the week.

The US-Mexico Trade deal continues to dominate market sentiment in the absence of any new headlines or data. The positive news saw investors shift gears and support a ‘risk-on’ mood in global markets. While the currency movements have been modest, the market nevertheless, continued favouring USD counterparts as it awaits further news from the US-China trade front.

The USD was otherwise still weighed down by Jerome Powell’s dovish speech on Friday but also found assistance from the US CB Consumer Confidence figure which jumped to 133.4. The reading is the highest since November 2000 and helped the Greenback shrug off some of its negative movements. Overall, fortunes were mixed for the US Dollar in overnight trading with investors treading water ahead of any substantial news.

Attentions now turn to Preliminary GDP Quarter on Quarter numbers and the Crude Oil Inventories for direction, while keeping a close eye on the headlines.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6210 – 0.6310

The EUR/USD hit a 4-week high early in North American trading session on the back of a sliding Greenback. The pair touched 1.1733 last seen on July 31st, unfortunately the move was short-lived following the release of mostly positive data out of the US. Consumer Confidence unexpectedly rose in August to its highest level since October 2000 jumping from 127.9 in July to 133.4 in August. Meanwhile, the Richmond Fed manufacturing index rose to 24 in August from 20 in July, against consensus expectations for a decline to 17.

The EUR/GBP rate also rallied hitting a near one-year high, the pair touched 0.9098 and is trading a shade under at 0.9085 at the time of writing

Looking ahead today sees the release of German Gfk Consumer Climate, French Consumer Spending and French preliminary GDP

The next point of resistance is the July 31st highs of 1.1750 and support is sitting at 1.1660.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9430 – 0.9580

The Canadian Dollar rallied through trade on Tuesday, buoyed by news the US and Mexico had reached a bilateral trade agreement bolstering hopes the three-way trade pact, NAFTA, can be reformed. The Loonie pushed through 0.7750 after President Trump and Pena Nieto announced a preliminary agreement that solved many of the open issues and opens the door engaging Canada on broader NAFTA discussions.

The Tri-lateral trade agreement has long been a ley driver of CAD fortunes and while we are still some way off a reformed accord this week’s progress goes along way in easing fears talks will break down completely. Loonie direction will remain tied to ongoing trade discussions and with significant challenges still to be resolved there is still a strong possibility an agreement will not be reached before year end.

Attentions today turn to the Current Account balance ahead of tomorrow’s all important monthly GDP print.

 

 

 

Posted by OFX