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United States Dollar
The US dollar remains unchanged this morning, and has traded within a narrow range of 0.17 percent in the last 12 hours. Global growth concerns resurfaced with a negative earning reporting release of industrial bellwether Caterpillar and other important technology companies such as Nvidia. There was an equity sell off in North America and currencies such as the Japanese Yen outperformed commodity currencies (e.g. the Canadian dollar) and emerging market currencies (e.g. the Mexican Peso).
With only one day before the FOMC rate decision, dovish Fed rhetoric has weighed on the Greenback, with even Kansas City President Esther George (a renowned hawk on interest rates) urging the Fed to be patient on rates. The focus is now on Wednesday’s policy statement, and comments from Chairman Powell at the press conference afterward.
This morning, we have a “risk on” environment, which is not helping the US dollar. Additionally, markets are pricing a low probability of rate hikes this year. Aside from the Fed, any signs of progress in U.S.- China trade negotiations could push the Greenback lower as “risk on” sentiment rises, even though it is unlikely that a deal will be concluded at this week’s meeting. Of course, the US dollar performance is also dependent on other currencies’ inherent strengths or weaknesses, as occurred with the Euro yesterday. The EUR/USD pair appreciated 0.23 percent (a weaker US dollar) in yesterday’s trading session.
USD / CAD Expected Range: 1.3200 – 1.3275
The Loonie’s price had a retracement during yesterday’s trading session, falling 0.33 percent versus the US dollar despite the bullish momentum that started on Friday. This morning the USD/CAD pair is trading at the same closing price as yesterday at 1.3260, even though crude oil WTI was bouncing around 1 percent this morning.
The U.S. – China trade discussion will be back in the headlines this week as Chinese and U.S. officials hold a second round of talks on Wednesday and Thursday. The trade tensions between the two largest economies in the world might take a toll on the Loonie’s performance over the next few days. On a similar note, the United States government has officially sent Canada an extradition request for Meng Wanzhou, the Huawei CFO at the center of an indictment that alleges a conspiracy to violate U.S. sanctions against Iran by doing business through a hidden subsidiary.
There are no releases in Canada until Thursday when the monthly GDP and yearly GDP report are going to be released.
Technically speaking, the USD/CAD has strong resistance between 1.3270 and 1.3280. If there is no bad news in the equity market, or if there are not decreases in crude oil prices, the USD/CAD pair might test the 1.3200 handle in the next days.
EUR / USD Expected Range: 1.1400 – 1.1444
The EUR/USD pair is trading sideways this morning, but it has generally been one of the better performing currency pairs over the last two days. It was a bit of a turnaround for the single currency after ECB President Mario Draghi’s dovish comments during the ECB press conference last week.
Testifying yesterday before the European Parliament Economic and Monetary Affairs Committee, Draghi noted the ECB was open to resuming quantitative easing if needed in 2019, but this would be unlikely. He said that growth continued to be softer than expected, and was critical on demands from external countries as geopolitical factors continue to weigh. Still, it was nothing traders hadn’t heard before, and the single currency has been bid higher since.
There’s no European data due today. EUR/USD traders, while mostly focused on US risk events, will have half an eye on the German Prelim CPI tomorrow as well as some German confidence numbers.
GBP / USD Expected Range: 1.3069 – 1.3300
The debate on Theresa May’s neutral motion, designed to allow discussion of next steps on Brexit, and to which MPs have been tabling their amendments, keeps the Pound on everybody’s radar, Brexit Secretary Steve Barclay will open the debate – although the start time could face delays due to urgent questions and other statements in the Commons. Mrs. May is expected to close the debate at around 1:30 pm EST. The critical part of the evening will begin at 2:00 pm EST, when voting on the various amendments gets underway.
The GBP/USD is trading at 1.3188 this morning, a 0.24 percent increase.
AUD / USD Expected Range: 0.7126 – 0.7167
The AUD/USD pair dropped slightly last night following the release of weaker than expected NAB Business Confidence, which printed at its worst level since 2014.
It’s recovered since through, and then some. The recovery has been partly inspired by comments from RBA Board member Harper, who said that he still saw the next RBA rate move as higher.
These comments may well seem out of place should Australian inflation data print weaker than market forecasts later tonight. It is expected to come in at 0.4 percent quarter to quarter. It’s a big set of data and could have a significant impact on the Aussie dollar.
New Zealand Dollar
NZD / USD Expected Range: 0.6812 – 0.6860
The NZD/USD pair has traded in a similar vein to the AUD/USD in the last 12-24 hours. The Kiwi got an extra boost following the release of a healthier NZ trade balance print overnight, and the pair opens in North America at 0.6845.
Posted by OFX