The US dollar remains unchanged in anticipation of Powell's policy statement tomorrow

OFX Daily Market News

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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.

 

 

 

  Canadian Dollar

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.

 

 

 

  Euro

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.

 

 

 

  British Pound

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.

 

 

 

  Australian Dollar

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

US dollar unchanged as the US government reopens

OFX Daily Market News

Posted by OFX

  United States Dollar

The US dollar is unchanged this morning after the U.S. government reopened after the longest shut down in US history. President Donald Trump signed a deal that will keep the government funded until February 15, despite there being no funding for his promised border wall. During the stalemate, Trump’s popularity sunk to an all-time low last week when Commerce Secretary Wilber Ross said that unpaid federal workers should tide themselves over with loans and couldn’t understand why they were using food banks. Eight hundred thousand federal employees did not receive paychecks during the shutdown.

The Chairman of the Council of Economic Advisers, Kevin Hassett recently said the the shutdown could reduce quarterly annualized economic growth by 0.13 percentage points for every week that it lasts. After more than four weeks, that’s the equivalent of a 0.6 percent reduction in the annualized growth rate, the Center for a Responsible Federal Budget noted.

To add more drama, President Trump said yesterday that he doesn’t believe congressional negotiators will strike a deal over border-wall funding that he could accept. He vowed that he would build a wall anyway, using emergency powers if need be.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.3200 – 1.3298

The Loonie rallied almost 1 percent last Friday amid a rally of crude oil WTI and a very weak US dollar. The USD/CAD pair has touched an intraday low of 1.3203 in the overnight trading session. This morning though, the Loonie is erasing some of its gains. The USD/CAD is trading at 1.3260, an increase of 0.35 percent, animated by a decrease in the crude oil WTI price of 2 percent. Oil prices slipped on the expansion of rigs by US companies, signaling a further rise in oil supply.

The next relevant release related to the Canadian Loonie is the monthly GDP and yearly GDP report anticipated on Thursday. This morning, futures for Canada’s main stock index fell on Monday.

Technically speaking, the USD/CAD has strong support at the 1.3200 handle and strong resistance at around 1.3269.

 

 

 

  Euro

EUR / USD Expected Range: 1.1350 – 1.1444

The EUR/USD pair pushed back through 1.1400 handle on Friday against a backdrop of a weakening Greenback. It’s remained firm since and it is trading at 1.1418 this morning, a 0.1 percent increase.

The risk for the Euro, today at least, is that European Central Bank President Mario Draghi sounds dovish on monetary policy – as he did in the ECB press conference last week – when he testifies before the European Parliament at 9:00 am EST.

Later in the week, German Prelim CPI is released along with a series of European Flash GDP prints.

 

 

 

  British Pound

GBP / USD Expected Range: 1.3069 – 1.3266

The GBP/USD pair pushed higher through the trading’s session on Friday, largely a result of a sell-off in the US dollar, this despite news breaking that a deal had been reached to end the US government shutdown temporarily.

Positive Brexit sentiment also played a part. Markets are increasingly pricing in less of a chance of a no-deal. The Sun newspaper reported that Prime Minister Theresa May had told her cabinet privately that she has ruled out a no-deal Brexit, which was seemingly lending further support to the Pound last Friday.

This morning the GBP/USD is falling 0.26 percent, trading at 1.3160.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7165 – 0.7200

Like most other currencies versus the US dollar, AUD/USD pair trended higher on Friday’s trading session. It has been steady overnight and held on to these gains while it was a public holiday in Australia. Regarding local data, traders will be looking to inflation data on Wednesday.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6807 – 0.6860

The NZD/USD is trading flat this morning since markets opened. With little by way of local market news, the commodity-linked currency continued to benefit amidst a backdrop of a softer Greenback.

 

 

 

Posted by OFX

AUD drops as NAB lifts mortgage rates.

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar plummeted against the United States Dollar during yesterday’s trading session to hit a one week low of 0.7083. There was a spike after the release of the Australian Bureau of Statistics unemployment report which came in higher and around it’s forecasted figures. The employment change data, represents the change in the number of employed people during the previous month came in at 21.6k, higher than it’s forecast of 17.3k. This rise reversed course as major bank NAB increased it’s variable mortgage rates, following a move by other major banks last year.

With a lack of macroeconomic data for the AUD in the near future, there may be some volatility on Monday due to Australia observing as public holiday. While the Australian banks are closed, the market is less liquid. During this time, speculators become a more dominant market influence and can cause volatility.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0445 – 1.0685

The Kiwi has remained relatively resilient despite a bullish United States Dollar in overnight trading, opening this morning at 0.6760.

The New Zealand Dollar had little to digest on the economic calendar and took its cues from off-shore forces. Initially in the session the Kiwi did manage to trade higher after the spill-over effects of a decent Australian unemployment rate release supported the NZD. The Kiwi then moved even higher, trading slightly above the 0.68 level. Ultimately however, the softer European PMI numbers and dovish ECB statement conspired to undermine global risk sentiment which led to a stronger Greenback, and a falling Kiwi.

The Kiwi, Aussie cross rate also enjoyed a significant strengthening after the Aussie reversed trajectory later during the session. NAB increased the floating mortgage rates by 12-16bps to be more in line with the other banks. The market however, interpreted the move as increasing the chances of a RBA cut later in the year and undermining the Aussie. The cross trades this morning at 0.9540.

The New Zealand Dollar is again set to enjoy a quiet day on the economic calendar with direction driven by global headlines.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7915 – 1.8495

The Great British Pound remains relatively unchanged despite some softer than expected European PMI numbers. The Sterling worked its way slightly lower against its US counterpart to open this morning at 1.3057.

The hard-hitting news overnight originated from the Eurozone with soft PMI data and downside growth risk warnings by the ECB undermining the Euro. The softer numbers and statement spread like a contagion, reversing market sentiment although the impact was primarily limited to US treasury yields, commodity currencies and of course the eurozone. The United States Dollar did however reverse the weekly trend and appreciate on the news, forcing the Sterling lower.

The Great British Pound is now set to enjoy a quiet close to the week with little on the economic calendar to digest but will of course keep a close eye on Brexit developments.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7025 – 0.7255

The Great British Pound remains relatively unchanged despite some softer than expected European PMI numbers. The Sterling worked its way slightly lower against its US counterpart to open this morning at 1.3057.

The hard-hitting news overnight originated from the Eurozone with soft PMI data and downside growth risk warnings by the ECB undermining the Euro. The softer numbers and statement spread like a contagion, reversing market sentiment although the impact was primarily limited to US treasury yields, commodity currencies and of course the eurozone. The United States Dollar did however reverse the weekly trend and appreciate on the news, forcing the Sterling lower.

The Great British Pound is now set to enjoy a quiet close to the week with little on the economic calendar to digest but will of course keep a close eye on Brexit developments.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6195 – 0.6360

The Euro dollar suffered a heavy sell-off against the Greenback as investors squared out of their long positions following Mario Draghi’s interest rate decision and his press conference speech. Weak Eurozone didn’t help matters, EUR/USD slid down from 1.1391 down to 1.1289 and breaking the long-term support of 1.1300.

Flash Manufacturing for the Eurozone fell to 50.7 in January down from 51.1 in December, this was the lowest level since 2013. Export orders continued to slide. The culprit behind the subdued momentum remains global demand, but trade wars and the still embattled automotive sector were reportedly at play.

The ECB left its monetary policy unchanged which was widely expected. However, the ECB has finally admitted that the growth risks are now biased downwards, blaming protectionism for the change. The ECB stated that there would be no changes in their stance until the next staff projections are updated in March.

Looking ahead, German Ifo business climate is due for release. The Business Climate score has slowed down for four straight months, falling to 101.0 and missing the estimate. The negative trend is expected to continue, with an estimate of 100.7 points.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9410 – 0.9590

The Canadian Dollar seesawed through Thursday day of trading against the Greenback, moving within a tight range of approx.40 pips of 1.3332 and 1.3375. The so-called Loonie was hit by a stronger Dollar during North American trade and also affected by disappointing Canadian monthly retail sales data, showing a decline of 0.9% in November.

The pair has also been weighed down by a pull-back in crude oil prices. Oil prices lost some additional ground on Thursday amid lingering concerns over global economic growth, which coupled with some USD strength helped the pair regain positive traction and climb above mid-1.3300s.

 

 

 

Posted by OFX

Dollar erases most of yesterday's gains on talk of global slowdown

OFX Daily Market News

Posted by OFX

  United States Dollar

The US dollar is decreasing sharply this morning (almost 0.50 percent) after a tone of cautious optimism at Davos and knowledge of a slowdown in the global economy.

Domestically, according to the Wall Street Journal, Federal Reserve officials are close to finalizing the decision to maintain a broader portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight.

During the trading session yesterday, the EUR/USD traded between 1.1289 and 1.1391 after Draghi’s comments and the ECB rate decision. This will make for an interesting Friday close, because the Euro is trading at 1.1367 this morning. The Euro is more than 50 percent of the US dollar index; it is the main FX pair to watch to have a clue about the US dollar’s direction.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.3200 – 1.3282

The Loonie rallied in the overnight trading session. It has been a week without many Canadian events on the schedule, except for retail sales on Wednesday and both manufacturing sales and wholesale trade sales on Tuesday, which were not good news for the Canadian Economy. All things considered, the Loonie has depreciated only 0.2 percent against the Greenback so far since the start of the week. However, it has performed better than the Japanese Yen (+0.6 percent) and the Aussie dollar (+0.3 percent) during the same period.

We will receive news about the Canadian economy next week, with the release of the monthly GDP and the yearly GDP report on Thursday. Part of the Loonie’s rally overnight was encouraged by a slight bounce of crude oil WTI, which at one moment earlier today touched 53.69 US dollars a barrel, but it is trading at around 53 dollars at the time of this writing.

Technically speaking, the USD/CAD is making patterns that indicate that if it stays below the 1.3300 handle, it might continue to the 1.3200 handle (stronger Loonie). However, if it trades above 1.3375, it would have space to go higher, probably close to 1.3500 (weaker Loonie). The USD/CAD pair is trading at 1.3283, which is a 0.50 percent fall (strong Loonie) at the time of this writing.

 

 

 

  Euro

EUR / USD Expected Range: 1.1350 – 1.1411

EUR/USD was sold off yesterday following the European Central Bank’s assessment of the Eurozone economy. The ECB left its monetary policy unchanged, which was widely expected. However, they finally admitted that the growth risks are now biased downwards, blaming protectionism for the change. The ECB stated that there would be no changes in their stance until the next staff projections are updated in March. President Mario Draghi also indicated that the persistence of weak data would dictate the type of policy action at the following meetings.

EUR/USD fell below the 1.1300 handle on the news but has quickly recovered since and opens this morning back above the big figure.

There’s no data due out from the Eurozone today, but the ECB’s dovish stance will likely keep any Euro gains in check though.

 

 

 

  British Pound

GBP / USD Expected Range: 1.3070 – 1.3200

The GBP/USD pair pushed higher overnight following rumors that the Democratic Unionist Party would be backing Prime Minister Theresa May’s Plan B next week. It is trading at 1.3124 this morning, a 0.47 percent increase. This latest headline is providing some good support this morning too, albeit the pair has come down off its overnight highs.

There’s not a lot of top tier data due for release, and so the focus is likely to remain affixed on Brexit related headlines.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7150 – 0.7215

The AUD has remained on the back foot for the last 12 hours or so. If anything, it’s been bid slightly higher, mostly a result of some mild weakness in the Greenback.

It’s a public holiday in Australia on Monday and so action in AUD/USD, like most other major pairs, is likely to be muted.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6807 – 0.6842

The Kiwi, like the Aussie dollar, made some mildly positive gains overnight. There was no apparent cause other than a slightly weaker Greenback.

Other than ‘visitor arrivals’ there was no top tier local data out from New Zealand.

 

 

 

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The US dollar advances as the Euro weakens, after a more dovish than expected European Central Bank

OFX Daily Market News

Posted by OFX

  United States Dollar

The US dollar increased 0.36 percent after the European Central Bank left the benchmark interest rate unchanged as expected. At its first meeting of 2019, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility unchanged at 0.00, 0.25 and -0.40 percent, respectively. European economists and strategists think that investors already expect a dovish tone at today’s ECB meeting, suggesting a limited market impact.

The Eurozone has been stung by the trade tensions of recent months. Furthermore, an issue hurting Europe is the weakness in China. Europe is an open economy and the trade story has weakened it. This situation is pushing the US dollar higher, but it is more about the perception of weakness in the European economy than strength in the US economy.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.3300 – 1.3375

This morning, the Loonie was hit by a strong US dollar, but also by a weaker Euro – an effect of a more dovish than usual press conference speech by Mario Draghi, European Central Bank. This situation is influencing other major currencies in addition to the US dollar, such as the Canadian dollar and Australian dollar. At the time of this writing, the USD/CAD pair rose 0.17 percent, touching an intraday high of 1.3375.

One of the main drivers of the Loonie, the crude oil WTI, is still trading sideways, with market participants taking profits after the recent bounce from 42 dollars a barrel in December to around 54 dollars on Monday this week. The U.S. oil prices are still under pressure as investors remain focused on global economic growth concerns, and how a slowdown might put a dent in demand for oil.

 

 

 

  Euro

EUR / USD Expected Range: 1.1315– 1.1400

The EUR/USD pair fell 0.27 percent after the European Central Bank left the benchmark interest rate unchanged as expected. The EUR/USD has moved in a range of 80 pips in the last 9 hours, falling from 1.1387 to an intraday low of 1.1307, right after Mario Draghi started his talk. At its first meeting of 2019, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main re-financing operations, the marginal lending facility, and the deposit facility unchanged at 0.00, 0.25 and -0.40 percent, respectively.

 

 

 

  British Pound

GBP / USD Expected Range: 1.3000 – 1.3100

Yesterday was another positive day for the British Pound, as markets continue to see a diminishing chance of the UK dropping out of the EU without a deal. The Sterling rallied on news that an amendment was scheduled to be tabled in parliament by Labour MP Yvette Cooper. Her aim is that if no deal is struck by the end of February, then Theresa May would be legally obliged to extend Article 50’s deadline until December 31st, thereby giving more time for an agreement to be found. Extra upward pressure was given to the Sterling later in the day as the Chairman of the pro-Brexit European Research Group, Jacob Rees-Mogg, stated that Theresa May’s proposed withdrawal agreement could be “reformed”, and that he believed things were moving their way with regards to the much-opposed Irish border “backstop.” GBP/USD cracked 1.3000 then 1.3094 and came very close to breaking the 1.3100 handle during the Asian session, before some profit taking took place and it started to retrace.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7075 – 0.7120

There was some good news domestically yesterday. The level of unemployment unexpectedly dropped back to 5 percent when a hold at 5.1 percent was predicted. The AUD/USD jumped 25 pips to 0.7165, however, the rally was short-lived, and the Aussie slipped back towards the 0.7100 handle. High levels of household debt are compounding ongoing trade concerns between the US and China, which are creating a headwind for the Aussie dollar. Many predict a new level in the high 0.60s will soon be commonplace. The AUD/USD trades at 0.7114 this morning.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6750 – 0.6815

After popping higher on Tuesday night’s higher than expected CPI print, the Kiwi has fallen away mirroring moves in the other commodity currencies. There is little domestic data of note to concern NZD market participants, so expect the Brexit, US/China trade, and the shutdown to be the primary movers of the local dollar. The NZD/USD trades at 0.6788 this morning.

 

 

 

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AUD shrugs off equity softness and clings to short term supports

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Australian Dollar clung on to short term supports through trade on Wednesday bouncing back through 0.7140 despite a downturn in market sentiment driven by equities and US yields. The AUD largely resisted the broader souring of risk appetite, ignoring the sell of in commodities and equity market uncertainty to bounce off intraday lows at0.7118 and push back toward key technical supports at 0.7142. With little domestic data on hand to drive direction the AUD was largely at the mercy of wider global trends and equity flows as investors appeared content to sit back and restore recent ranges ahead of today’s employment report.

Labour Market data for December is due this morning with analyst estimating a modest rise in total employment with 18,000 new roles created, while revisions to November data sets are expected to show true job creation numbers jumped to 37,000, bolstering the pace of jobs growth through H2 2018 to 2.9%. We anticipate labour market performance to remain strong through the short term but note the distinct lack of a flow on into wage and price pressures and until we see an uptick in these key underlying indicators there is very little incentive for the RBA to move away from its current policy setting; in fact, persistent softness coupled with a downturn in GDP could amplify calls for a rate cut and weigh on the AUD through H1 this year.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0480 – 1.0680

The New Zealand Dollar, also affectionately known as the Kiwi, rose 0.9% from this time yesterday after a stronger than expected CPI reading. Opening this morning at 0.6788, the New Zealand Dollar failed to breach 0.68 but certainly tested the level.

The CPI reading wasn’t all positive with headline inflation posting softer numbers, as expected. The critical key core measures however showed higher inflationary pressure despite the core inflation estimate remaining un-changed at 1.7%. This supporting evidence of underlying inflationary pressures buoyed the Kiwi through the session.

Moving into Thursday, the New Zealand Dollar enjoys a relatively quiet day on the economic calendar with all eyes on Australian labour figures for direction.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7950 – 1.8250

The Great British Pound was bid higher overnight as reduced risks of a no-deal Brexit buoyed the Sterling. The Pound reached as high as 1.3080 against its US counterpart, its’ highest level since early November, before moderating its gains to open this morning at 1.3066.

Again, Brexit proceedings dominated market direction with the Sterling responding positively to fresh parliamentary reports. There are signs that the labour party are increasingly likely to support a proposal to extend the 29th of March Brexit deadline to avoid a no-deal exit. Pro-Brexit trade Secretary Fox also hinted that he could live with a short extension, supporting the drive for the deferment. The EU are reportedly also open to an extension which adds further impetus to the idea. The crucial aspect to on-going discussions however is the almost bi-partisan resolve to avoid a no-deal Brexit which has helped the Sterling move higher as the risks of no-deal fade.

Moving forward, the Sterling again looks to on-going Brexit headlines for direction as well as some PMI data in Europe. The ECB is also set to release their refinancing rate and hold a press conference.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7080 – 0.7230

The USD is down against the AUD during yesterday’s trading session to open at 1.4002 this morning, holding against the resistance floor of 1.4. The reason for the drop can be owing to a stronger expected AUD with major releases coming out later today. The Richmond Manufacturing Index released this morning also came back at a figure less than 0, at -2. This indicates that conditions, while improving on previous figure of -8 are improving, but are still not ideal for the region.

While the world awaits the United States decision on the trade war and the government shutdown, the USD sees a sleuth of data releases tomorrow that are expected to have impacts on the greenback. Global financial firm Markit and the Energy Information Administration will be releasing their data on PMI (Purchasing Manufacturing Industry) and Natural Gas Storage and Crude Oil Inventories respectively. Any figures above their forecasts are expected to be good for the currency.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6220 – 0.6380

The Euro Dollar hovered between 1.1345 and 1.1394 on Wednesday and any moves higher have been capped ahead of the ECB meeting today. The range for the week so far is only about 59 pips from the low to the high so we could expect to see a move outside of this narrow range. Eurozone Consumer Confidence had little impact, numbers showed confidence rose in January to -7.9 from a -8.3 in December.

As mentioned, today sees the ECB President Mario Draghi’s interest rate decision, it is widely expected to announce no new changes to its policy however, Draghi may deliver in his press conference a dovish tone amid recent weakness in German and Chinese data along with ongoing Brexit uncertainties.

From a technical perspective the pair has been sitting above a long-term support of 1.1300 which is a level to watch on the downside. On the upside 1.1390 is facing resistance followed by 1.1450

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9450 – 0.9580

The Canadian dollar fell through trade on Wednesday following a softer than anticipated retail sales print and an uptick in dovish rhetoric from the Bank of Canada. Retail sales fell sharply in November comfortable missing market estimates as consumers reigned in their spending ahead of the holiday period forcing the CAD back below 0.75 US cents. Bank of Canada Governor Stephen Poloz then added further pain to the already beleaguered Loonie affirming the bank has shifted to a data dependent platform for policy change. Concerns surrounding a weakening housing market, lower oil prices and persistent global trade tensions loom over the BoC’s decision making processes and offer little incentive to tighten rates in the near term, forcing investors to push back expectations for monetary policy adjustment.

The CAD has now all but given up the gains it enjoys through the first two weeks of the year as markets reposition their expectations for BOC interest rate hikes, pushing bets back from March/April into the second half of the year. With little of note on the domestic docket today direction will stem from broader directional flows ahead of next weeks GDP print.

 

 

 

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Aussie lower as risk aversion grips global markets

OFX Daily Market News

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  Australian Dollar

The Australian dollar fell to 0.7122 against the greenback, a 0.5% fall on the day and representing a 10-day low as risk aversion reared its head again. The risk aversion was largely driven by the news that US-China trade negotiators were making little to no progress on the US’s intellectual property concerns. Global growth concerns were also stoked, with the international Monetary Fund downgrading their global growth projections which was reinforced by weakness in both US and German data releases.

Interestingly, the NZD outperformed, forcing the AUD/NZD cross 0.4% lower on the day to trade at 1.0595 ahead of today’s crucial New Zealand Q4 CPI release (8:45am EST). The read is expected to be flat for the quarter with the underlying metric expected to remain resilient. A beat should see AUD/NZD push lower as the Kiwi rallies however we would likely see the Aussie dragged higher against the greenback.

Adopting a technical viewpoint, we see initial AUD/USD supports at 0.7100 (psychological level) before 0.7035 on the downside. On the topside, first lines of resistance are seen at the 20 day moving average handle of 0.7140 before the Jan 17 high of 0.7220.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0490 – 1.0650

The New Zealand Dollar remained relatively range-bound despite a deterioration in sentiment invading global markets. Opening this morning at 0.6730, the Kiwi opens virtually unchanged from yesterdays open which is a good outcome considering the global environment.

In what was a quiet day on the domestic calendar, the Kiwi moved within a tight range but did feel the effects of global markets, briefly dipping late in the afternoon against its US counterparts. Against the other commodity currencies however, the NZD fared a lot better with the NZD/AUD appreciating to 0.9430 and 0.8970 against the CAD.

Moving into Wednesday the Kiwi has some local data to digest with the Q4 CPI reading set for release.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7950 – 1.8250

The Great British Pound was one of the best performers overnight despite a wholesale deterioration in market sentiment led by equities and bonds. Commodity currencies bore the brunt of the declines while the Sterling traded on Brexit reports and positive economic data. The Pound appreciated 0.6% to open this morning at 1.2953.

The Sterling enjoyed support from a variety of sources with a strong labour market report leading the way. The report highlighted a fall in the unemployment rate to 4% and the strongest wage growth since the GFC. Adding to the optimism were reports emanating from Parliament that suggest the UK Parliament will be more in control of the Brexit process. A number of amendments have been proposed including, staying in the custom union, a second referendum or an extension of article 50. All three suggestions heavily discount the chance of a disorderly, no-deal Brexit which helped the Pound appreciate further.

Looking forward, the Sterling will again take direction from Brexit headlines.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7060 – 0.7160

The USD rose against the AUD yesterday, from a floor of 1.3968, hitting a fresh 1 week high of 1.4052. Disappointing GDP data from China confirmed an economic slowdown, hurting the market sentiment. The greenback took advantage of the dismal market mood and gained momentum amongst lower than expected data from existing home sale data. Reports earlier today reported that President Donald Trump is expected to force the government to maintain the shut-down. This could cause the risk-off mood to continue in the market.

The U.S. has proclaimed it is going ahead with the extradition of Meng Wanzhou, the finance director of telecom company Huawei under claims she breached American sanctions by doing business with Iran. This is seen as a threat against an expected deal to end the trade war between the United States and China. While the agreement has plenty of time to be negotiated with a deadline of March 1st, this event undermines hope for a negotiated trade solution between the two economic powerhouse countries.

The USD opened at 1.4049 against the AUD this morning.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6200 – 0.6310

The Euro Dollar zigzagged against the Greenback on Tuesday, initially moving off intraday highs of 1.1372 and touching a low of 1.1336. The pair didn’t react too much to a German consumer confidence report where the ZEW Consumer Sentiment numbers remained weak but were still better than expected. In fact, German Economic Sentiment improved to -15.0 for the current month while Current Conditions came in at 27.6 vs. 43.5 forecasted. Additionally, Economic Sentiment in the broader euro area slipped back to -20.9 for the same period.

The local calendar is light today and the Euro is expected to remain under some pressure ahead of the ECB meeting tomorrow where President Draghi is expected to deliver a cautious (dovish?) message.

On the technical front, the next line of supports currently sits at 1.1324 and then 1.1306. On the flip side, a break above 1.1380 would target 1.1415.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9460 – 0.9560

The Canadian Dollar has weakened against the U.S Dollar following disappointing local data, the USD/CAD opened the Asian session around 1.3296, as the trading session progressed and moved into Europe and North America the Greenback touched a two-week high of 1.3357 just before the close. According to the Statistics of Canada, Manufacturing Sales decreased by 1.4% on a monthly basis in November following October’s 0.1% decline. Furthermore, wholesale sales dropped 1% in the same period to miss the market expectation for a no-change.

A drop in oil prices didn’t help, US crude oil dropped 2.3% down to $52.57 a barrel on fresh signs of a global economic slowdown.

On the technical front, the next line of support sits at 1.3330 and then 1.3230, on the flip side, a break above 1.3385 would target 1.3420

 

 

 

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The US dollar decreases after the European Union seems likely to retaliate on EU cars and auto parts duties

OFX Daily Market News

Posted by OFX

  United States Dollar

The US dollar is decreasing 0.1 percent amid higher U.S. stock futures prices after reports that the Senate will vote Thursday on rival proposals to end the partial shutdown of the federal government. On top of that, the US dollar did not get buying pressure after news from the European Union related to a potential hit of US$ 22.7 billion on U.S. goods through tariffs if President Trump follows through on the threat to impose duties on EU cars and auto parts.

Regarding the US-China trade war, advisers to President Trump said he wouldn’t soften his hard line on trade with China just in return for a promise to buy more U.S. goods. U.S. Trade Representative Robert Lighthizer said that the administration wanted Beijing to move on more structural issues such as intellectual property theft and forced technology transfers. Officials also had to deny reports that the White House had refused to meet a lower-level delegation ahead of vice-premier Liu He’s visit to Washington D.C. next week.

As the partial U.S. government shutdown continues, sophisticated FX market participants are getting creative when it comes to analyzing FX positioning because the last U.S. Commodity Futures Trading Commission positioning data only covered until the week through December 18th.

 

 

 

  Canadian Dollar

USD / CAD Expected Range: 1.3300 – 1.3360

The Loonie was appreciating this morning around 0.16 percent versus the US dollar after a bounce in the oil prices. Oil prices edged up Wednesday morning, partially recovering a day after the leading benchmarks fell by roughly 2 percent amid fresh investor concerns about slowing global economic growth. This morning, however, the Loonie’s appreciation erased most of its gains after retail sales came in at -0.9 percent versus the expected -0.6 percent (month to month in November) and retail sales ex-auto came in at -0.6 percent versus a -0.4 percent read (month to month in November). The USD/CAD is still trading lower, 0.10 percent (stronger Loonie), but market participants have started to show some worries about the Canadian economy.

The next piece of information for the Loonie will come next Thursday, January 31st, when Gross Domestic Product numbers are released.

 

 

 

  Euro

EUR / USD Expected Range: 1.1325– 1.1375

If there is any data that the market thinks reflect the state of the German economy, it is the ZEW. The assessment of the current economic situation sunk to a four year low reflecting the current Brexit impasse, the US/China trade war, and global headwinds.

In a slight surprise, the sentiment moving forward picked up against expectations. Mario Draghi meets his colleagues tomorrow where the ECB is expected to downgrade forecasts for growth. Investors will be reading between the lines tomorrow when Draghi speaks at his press conference, although surprises might be few and far between with the ECB President having spoken as recently as last week to the European Parliament. If Draghi is particularly dovish, then EUR/USD could drop even more.

The EUR/USD pair is trading at 1.1357 this morning; the quietness in the Euro is typical hours before the European central bank announcement.

 

 

 

  British Pound

GBP / USD Expected Range: 1.2964 – 1.3092

There is life beyond Brexit apparently. Markets were reminded of that yesterday with the latest release of UK employment figures. The number of people in employment rose once again while the employment rate itself hit 75.8 percent; the highest level since records began. Importantly as well, with so little slack in the employment market, it’s also crucial to look at wage growth figures, which even beat expectations rising to 3.4 percent, the highest level since 2008. With real wages continuing to outstrip inflation, the Pound felt buoyed yesterday.

The market, however, is still solely interested in Brexit proceedings with reports that a hard-looking Brexit is entirely discounted however this still seems premature.

The GBP/USD pair is trading at 1.3033, a 0.58 percent increase.

 

 

 

  Australian Dollar

AUD / USD Expected Range: 0.7100 – 0.7150

The IMF chimed in recently regarding global growth forecasts for 2019, downgrading their expectations to 3.5 percent. Christine Lagard, MD of the fund, said that US-China trade wars, Brexit and the slowdown in China are hurting growth prospects. It is this focus on China which is a cause for concern for the Australian dollar. We wrote recently how the Chinese economy shrunk to a ‘modest’ 6.4 percent in Q4 2018 on an annualized basis. Over the last six days or so, the Aussie has slipped around 1 percent against its American counterpart as the slowdown continues. The AUD/USD trades at 0.7125 this morning.

 

 

 

  New Zealand Dollar

NZD / USD Expected Range: 0.6773– 0.6812

New Zealand inflation picked up at the back end of last year beating expectations and coming in almost exactly on point at the target of 1.9 percent. The Reserve Bank of New Zealand was the first central bank to adopt inflation targeting as we know formally, and today’s release of numbers has seen the Kiwi push on against a number of its counterparts, in particular, the US dollar. The NZD/USD pair is trading 0.45 percent higher, at 0.6780.

 

 

 

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AUD resilient in face of USD upswing

OFX Daily Market News

Posted by OFX

  Australian Dollar

The Aussie remains relatively unchanged this morning to open at 0.7159 after a mostly quiet day in foreign exchange markets. The US also celebrated Martin Luther King Day which didn’t help to induce market action.

The Australian economic calendar remained bare to start the week with direction being driven off-shore. Australia’s biggest trading partner, China, released their GDP figures which reported that China’s growth has receded to its slowest pace since the GFC. Annual growth came in at 6.4%, which was broadly in-line with market expectations but nevertheless a sobering figure in the context of global growth. There was some positive news however with industrial production and retail sales both above expectations, which helped support the Aussie. Adding to the Aussies anxiety though, were reports from Bloomberg that China and the US have so far failed to make progress on the alleged theft of US intellectual property by Chinese companies, a key sticking point in negotiations.

Moving into Tuesday, the Aussie again looks set to enjoy a quiet day on the economic calendar with direction to be dictated by off-shore forces.

 

 

 

  New Zealand Dollar

AUD / NZD Expected Range: 1.0540 – 1.0680

It was a relatively quiet day on the currency front as the United States observed a public holiday overnight – Martin Luther King Jr Day. With volume thinning out and volatility remaining low, the New Zealand Dollar moved little to start the week trading in a narrow range above the 67 US cent handle.

Opening the morning at 0.6740, the Kiwi extended its losses from January 15th Highs of 0.6848 to a morning low of 0.6720 before shifting higher following a positive lead from a raft of Chinese data including a higher industrial production print, growing to an annualised rate of 5.7%.

Steadying its ship overnight the NZD/USD finished a meagre 0.16% lower overnight as markets position itself ahead of tomorrow’s NZ CPI release where it is expected the local economy to have a neutral reading for Q4 2018. Volatility in recent fuel prices is unlikely to have a material effect on inflation till Q1 2019.

While liquidity is expected to remain thin on the markets today, the NZD is likely to see support at 0.6710 with topside resistance in the short term at 0.6770.

 

 

 

  British Pound

GBP / AUD Expected Range: 1.7720 – 1.8190

The Great British Pound was the strongest major currency overnight, moving 0.3% to 1.29 overnight. It did retreat slightly however, to open this morning at 1.2892.

Brexit continues to dominate market sentiment with fresh news driving direction. Prime Minister May has reportedly given up on her plan to build cross-party support for her EU withdrawal bill and will instead attempt to renegotiate the backstop arrangements to avoid a hard border in Ireland. Unfortunately for PM May, such a plan has been rebuffed by EU Chief Negotiator Barnier and the progress appears limited. Nevertheless, the market reacted positively to the news, potentially pricing in a softer Brexit or delays to the negotiations.

Moving into Tuesday the Sterling looks forward to some news on the calendar with the Unemployment rate and Average Earning index slated for release. Pundits will also keep a close eye on Brexit proceeding for direction.

 

 

 

  United States Dollar

AUD / USD Expected Range: 0.7080 – 0.7230

The USD rose against the AUD yesterday, hitting a 1 week high of 1.4001, breaking through the resistance ceiling of 1.4 before falling to open up this morning at 1.3969. US banks will be closed today due to bank holiday; Martin Luther King Day. When banks are closed, the market is less liquid and speculators influence the market more leading to more volatility.

The talks of trade war between the US and China are said to be progressing well, but unless an agreement is made by March 1st, the 10% levy will rise to 25%. The next round of talks is scheduled for January 30th, when Chinese President Xi Jinping’s economic advisor Liu He is expected to visit Washington for the next round of trade negotiations. This follows the lower-level negotiations that were held in Beijing last week.

 

 

 

  Euro

AUD / EUR Expected Range: 0.6220 – 0.6380

The EUR/USD moved within a tight range on Monday seeing a high of 1.1391 and a low of 1.3161, volume and volatility was light due to a U.S bank holiday. Global uncertainties about slowing growth and how political tensions may weaken global growth have made investors more inclined to hold onto safe haven currencies like the U.S Dollar. On the data front, yesterday saw the release of German PPI which came in lower-than-expected contraction of -0.4% month-on-month and the yearly figure fell to 2.7% rather than the expected 2.9%.

Looking ahead, today sees the release of German ZEW German ZEW Economic Sentiment. The survey of 300 German analysts and institutional investors continues to point to pessimism, with nine successive declines. The indicator improved to -17.5 in December, but is expected to weaken to -18.8 points in January. The eurozone indicator has also been marked by declines and the January estimate stands at -20.1 points.

On the technical front, immediate support sits at 1.1350 followed by 1.1309. On the upside, 1.1369 followed by 1.1391.

 

 

 

  Canadian Dollar

AUD / CAD Expected Range: 0.9450 – 0.9580

The Canadian dollar edged marginally lower through trade on Monday following a series of softening Chinese data sets and a US dollar upswing. Having enjoyed a strong start, wherein the CAD outperformed most of its G10 counterparts, the Loonie met selling pressures last week as the USD advanced on increased trade optimism and improvements across industrial activity. The USD enjoyed its first weekly advance of the year forcing the CAD toward two-week lows and despite a brief rebuke Friday the CAD continued the downturn through Monday, touching intraday lows at 0.7510.

Markets are continuing to adjust positions following Fridays softer than anticipated Consumer Price Inflation Index, amending expectations for BoC monetary policy changes and shifting toward a wait and see approach opening the door for a short term test of technical supports and a consolidated break below 0.7480/0.75.

Attentions now turn to domestic manufacturing numbers ahead of Core Retails Sales data Thursday for a broader insight in domestic economic performance. A print below market expectations will affirm concerns the economy is softening and likely enforce investors expectations for a period of neutral interest rates.

 

 

 

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Brexit and US-China trade war

OFX Daily Market News

Posted by OFX

  United States Dollar

The prospect of a more permanent truce in the US-China trade war followed a report in the Wall Street Journal claiming US Treasury Secretary Steven Mnuchin was considering scaling back tariffs on Chinese imports which helped push up Wall Street Stocks and Oil.

The US government shutdown is now the longest in history as Trump still refuses to re-open until the Democrats approve the $4.5bn funding he needs for his US-Mexico Border wall. Polls show that the shutdown is starting to take a toll on Trump’s voters more so than the democrats as both sides dig in for a battle they can ill afford to lose.

Despite rising optimism surrounding US-China trade ties providing a much needed relief to global equities, higher tariffs and the March 1st deadline are still in place. US and China senior officials are scheduled to meet in Washington on 30-31 January. Trade negotiations will remain difficult, and as the deadline approaches, the market will probably demand more convincing evidence that a deal is likely.

 

 

 

  Canadian Dollar

The Canadian Dollar is a commodity-linked currency and it is linked to fluctuations in global risk appetite, which in turn is impacted by China’s economic situation; however, it is less impacted than currencies such as the Australian dollar.

Last week the Canada took a turn for the worst after a Chinese court sentenced a Canadian man to death for attempting to smuggle drugs out of China. The verdict hastily handed down on Robert Schellenberg comes against the backdrop of Canada’s arrest in December of Meng Wanzhou, a top executive of Chinese technology giant Huawei at the request of the US.

The Canadian Loonie failed to gain the upper hand due to weak crude oil price action in the overnight trading session with cautious investor sentiment from European markets.

 

 

 

  Euro

Early in the week, E.U ministers stated they could accept a delay in Britain’s departure from the Bloc, but with conditions attached to extending Article 50 as May narrowly survived a Vote of No Confidence. The British Pound was the best performer in the last 5 days; it had an increase of 1%, 2.1% and 2.2% versus the USD, EUR and JPY respectively.

Draghi’s ECB presentation last week suggested a shift in attitude as he not only highlighted downside risks but admitted that the Eurozone might be facing a prolonged downturn (but not quite a recession). With the ECB still needing a very expansionary policy, guidance on rates may not change significantly at next week’s meeting. Investors are starting to speculate the ECB may well have missed their window of opportunity to raise rates, the probability of a rate hike by year end sits around 50%, it was 76% at the start of January.

 

 

 

  British Pound

Tory Eurosceptics are threatening to abstain or vote against the government if Theresa May pursues a softer Brexit with the support of Labour. A former cabinet member added that if such a deal was pursued, which includes endorsing a permanent customs union with the EU, there would be a hard core of MP’s who would wreak havoc.

After the rejection of her Brexit deal last week, Theresa May’s will present her Plan B to the UK Parliament on Monday. Risks of Article 50 being extended are looking more likely and according to weekend headlines, senior Labour representatives are trying to convince the party to support a fresh Brexit referendum. A new poll suggested voters would rather stay in the EU over accepting PM May’s Brexit deal.

 

 

 

  Australian Dollar

The AUD has so far climbed 2.2% in January, compared with the 10% drop in 2018. The drag from China comes just as Australia’s property market is in the grip of its worst downturn for 35 years as household debt continues to pile up.

Leading indicators released early in January are pointing to a further slowdown in the Chinese economy, keep an eye on Q4 GDP data to be released today at 1pm Sydney time. It is likely that the PBoC will take more aggressive, front loaded policy responses to mitigate a weakening Chinese economy with the likelihood of more record high liquidity injections to come in the short-term.

 

 

 

  New Zealand Dollar

Keep an eye on NZD CPI release on Wednesday, the kiwi had a couple of rough sessions last week and a soft CPI print could potentially put downward pressure on CPI expectations for the AUD. Both currencies tend to move in tandem, weak CPI readings will probably raise speculation around potential rate cuts by AU/NZ Central Banks in February.

 

 

 

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