Dumping Risk or panic attack?

Dumping Risk or panic attack?
Risk sentiment has gone in the tank on the continued rhetoric around Trump’s scheme to raise China tariffs to 25% instead of 10% with China claiming they will retaliate.
Global equities have buckled while commodities like copper, oil and soybeans are feeling the pinch from escalating tensions.
Oil Markets
Oil prices were struggling to gain traction on the back of July production numbers from Saudi and Russia, higher domestic inventories and Saudi Aramco’s decision to slash costs on September deliveries in an attempt to sell more barrels are contributing to the bearish mode.
 However, prices are have turned higher in early NY indicating a high degree of pliancy in the face of supply concerns. The move could be little more than hedging possible Strait of Hormuz weekend tail risk, but with S &P trading higher, Oil prices could be taking their cue for lightly better US equity risk sentiment.
Gold Markets
The precious space continues to be uninspiring with gold climbing to $1,221 overnight and lasts unchanged around $1,214, trading in just a $7 range, but longer-term value investors likely see opportunities on this move to $1200 to hedge capital market tail risk possibilities.
Equity Markets
Asia equity markets were smacked mercilessly overnight on the retaliatory comments from China. The Nikkei fell over 1% and gave back yesterday’s gains while China shares fell over 2% on both the Hang Seng and the SHCOMP
Also, a slightly more hawkish lean from the Fed has not endeared itself to global equity investors.
However, in early trade, US investors are in bargain hunting mode with Apple shares leading the charge, but the big questing is this the bulls last gasp before full-out bear mode takes control.??
 
Currency Markets
On currency markets, the Yuan depreciation has announced it’s self again as the go-to spot to expresses trade war bias. USDCNH is back to new highs at 6.87, not too surprising given the increased trade tensions.  While the JPY has strengthened as it’s starting to reaffirm itself one again as a critical risk correlation plays in G-10
The Dollar has ripped higher against both G-10 and EM currencies with Asia markets particularly sensitive getting peer pressure from the weaker RMB complex which remains at the epicentre of currency trade. But it’s not just trade data weighing on the Yuan sentiment, but the latest run of China economic data has been less than stellar playing into USD vs CNY policy divergence.
JPY: Post BoJ long USDJPY positions are giving way as risk aversion is settling in.
GBP: The Pound initially cratered after the BoE .25 % rate hike which had a decidedly one and done feel about it. But with central forecast thoroughly conditional on a smooth Brexit process, there remains a high level of uncertainty around the UK rate hike trajectory. Suggesting the GBP is still bearish post-BOE
MYR: Regional risk aversion, melting regional equity markets, a more hawkish Fed and slippery oil prices have proved to be a toxic elixir for Ringgit sentiment.

BoE hike a close call

Thursday August 2: Five things the markets are talking about

The Bank of England is more likely than not to hike interest rates +25 bps to +0.75% this morning (07:00 am EDT), but this has only recently become a closer call.

June’s BoE meeting minutes showed that three out of nine MPC members voted to raise rates, opening the door wide for a hike at today’s meet – futures are pricing a +91% odds.

Note: With those odds, the danger with today’s decision is if the BoE don’t go, then sterling (£1.3080) should plummet, otherwise the priced-in hike should have a limited impact.

However, for the ‘doves’ since then, June inflation has been lower than expected, earnings growth has slipped, and political and Brexit uncertainties are very much more heightened.

For the ‘hawks,’ the U.K economy continues to grow in line with, or slightly above, and employment is on the rise, two good reasons that should provide sufficient justification for a rate rise.

Elsewhere, global equities are a sea of ‘red’ ahead of the U.S open as President’s Trumps latest threats to free trade again has rattled markets – Trump is considering increasing proposed levies on +$200B in Chinese imports to +25% from +10%.

The ‘big’ dollar has found support, while sovereign bonds trade mixed as central banks policy decisions dominate proceedings. In commodities, oil prices touch a new two-week low on U.S crude inventories supply concerns, while gold prices remain choppy.

1. Stocks have little support

Global stocks are on the back foot amid heightened concerns over the escalating trade dispute between the U.S and China.

In Japan, equities again felt the impact from the slide in the broader Asian markets following Trump’s latest proposal on China imports. The Nikkei share average has pulled back from Wednesday’s two-week highs, as Chinese stocks fell sharply. The index ended the day down -1.03%, while the broader Topix fell -1%.

Down-under, Aussie shares slid overnight, pulled down by global miners – BHP and Rio Tinto. The S&P/ASX 200 index fell -0.6%. In S. Korea, the Kospi index also weakened on trade escalation worries. At the close, the index was down -1.6%, pressured mostly by major electronics and steel sector shares.

In China and Hong Kong, stocks extended their previous day’s losses as trade war fears, along with a Chinese vaccine scandal and signs of slowing domestic growth continue to undermine investor confidence.

At the close, the Shanghai Composite index was down -2% and the blue-chip CSI300 index fell -2.3%.

In Hong Kong, the Hang Seng index and the China Enterprises Index both ended down -2.2%.

In Europe, most regional bourses see red on geopolitical worries. Germany’s export-heavy DAX has already fallen -1.2% and this despite a declining EUR (€1.1617).

U.S stocks are set to open ‘deep’ down (-0.4%).

Indices: Stoxx50 -1.1% at 3,470, FTSE -0.8% at 7,588, DAX -1.8% at 12,516, CAC-40 -0.7% at 5,461; IBEX-35 -1.0% at 9,700, FTSE MIB -1.30% at 21,507, SMI -0.4% at 9,136, S&P 500 Futures -0.4%

2. Oil steadies to trade higher after losses, gold choppy

Ahead of the U.S open, crude oil prices have steadied after losses over the past two-days from a surprise increase in U.S crude inventories and renewed concerns over Sino-U.S trade friction.

Brent crude futures are up +16c, or +0.2%, at +$72.55 a barrel, after dropping -2.5% yesterday. U.S West Texas Intermediate (WTI) crude futures have rallied +6c, or +0.1%, to +$67.72 a barrel. They fell -1.6% yesterday.

Yesterday’s EIA report showed that U.S crude inventories rose +3.8M barrels last week as imports jumped. The market was expecting a drawdown of -2.8M barrels.

However, providing some support on pullbacks is ongoing tensions between the U.S and Iran.

Gold prices are small better bid, recovering from the yesterday’s session fall, supported by a weaker USD/JPY (¥111.44). Spot gold is up +0.2% at +$1,218.23 an ounce, after losing -0.65% Wednesday. U.S gold futures are little changed at +$1,226.70 an ounce.

3. Sovereign yields fall

Fears of an escalating trade dispute between the U.S and China is triggering a fall in some sovereign bonds yields.

In the Eurozone, German and French yields in particular have pulled back from their two-month highs as demand for safe-haven debt grows on trade fears.

In Germany, the 10-year Bund yield has eased -1 bps to +0.48%, while in the U.K, the 10-year Gilt yield has backed up +1 bps to +1.37%, the highest in seven-weeks.

Stateside, with the Fed leaving short-term interest rates unchanged yesterday, an upbeat assessment of the U.S economy’s performance would suggest another rate increase is likely at the next meeting in September. The market is pricing in an additional two rate rises by year-end.

4. Turkish lira at a new record low

With global risk appetite dwindling on global trade concerns is benefiting the U.S dollar. Also providing support for the greenback are rate differentials, aided by the Fed emphasizing yesterday, the U.S economy’s strength in a statement following its expected ‘no rate hike’ decision.

Overnight, the Turkish lira (TRY) has slid to a new record low outright of $5.0822 and is looking to go even lower. Year-to-date, brings its loss outright above -24% after the White House announced yesterday it would sanction the country over the detention of a U.S pastor.

Turkish inflation figures for July will be released tomorrow, and the market expects another acceleration. If so, this would be another negative factor for the TRY after the Central Bank of the Republic of Turkey (CBRT) recent decision not to hike their key interest rate.

GBP (£1.3071) is softer ahead of today’s anticipated “dovish” rate hike by the BoE.

In Japan, the BoJ demonstrated its flexibility in it policy performing an unplanned purchased in the 5-10-year JGB range during the Asian session that helped to cap rising JGB yields. Officials commented that it acted to meet target of keeping the 10-year JGB curve around 0.00% with the operation. USD/JPY (¥111.57) is a tad softer on ‘risk aversion’ trading.

Finally, the offshore yuan has hit its weakest level outright in more than 14-months ahead of the open after China said it would retaliate against the U.S on trade. The Chinese currency lost -0.6% to ¥6.8654.

5. Euro area industrial producer prices rise

Data this morning from Eurostat show that in June, industrial producer prices rose by +0.4% m/m in both the euro area (EA19) and the EU28. Year-over-year, prices rose by +3.6% in the euro area and by +4.4% in the EU28.

Digging deeper, the increase in the euro area is due to rises of +1.1% in the energy sector, of +0.4% for intermediate goods and of +0.1% for durable consumer goods, while prices remained stable for capital goods and for non-durable consumer goods. Prices in total industry ex-energy rose by +0.2%.

In the EU28, the increase is due to rises of +1.2% in the energy sector, of +0.4% for intermediate goods and of +0.1% for capital goods, durable and non-durable consumer goods. Prices in total industry ex-energy rose by +0.2%.

Forex heatmap

Trade war angst trumps Fed rate decision

Wednesday Aug 1: Five things the markets are talking about

Over the past fortnight, fixed income, forex and the commodities market have become rather boring and range bound. Will today’s Fed monetary policy announcement be the facilitator to end this market consolidation?

Futures prices would suggest rather strongly that, nope, there is nothing new to be seen this afternoon. It’s what you would call a “continuity” meeting, with little fanfare and maybe, but unlikely, a comment on trade tensions.

Capital markets may have to wait until Friday’s non-farm payroll (NFP) for some action, but that could even be a stretch as market participants historically head for the hills for holidays. Only liquidity tends to be a real concern this time of year. U.S payrolls are predicted to show a healthy labor market, with +190K new jobs.

Dominating today’s U.S central bank meet is conflicting signs over the state of the Sino-U.S trade relations. It’s again pulling markets in different directions on rumours that the Trump administration is expected to announce this morning plans to propose tariffs of +25% instead of the initially proposed +10% on +$200B of imported Chinese goods.

Both equities and commodities are struggling on these headwinds to trade after China threatened to hit back if the U.S hikes tariffs. The dollar has found some traction, while JGB’s lead sovereign debt lower.

1. Stocks mixed reaction

In Japan, the Nikkei rallied overnight to trade atop its two-week high, supported by strong earnings for blue chips such as Sony and Sharp and the yen’s slide (¥112.02) to a 10-day low outright. The Nikkei ended the day up +0.86%, it’s highest since July 20, while the broader Topix closed out +0.94% higher.

Down-under, in a muted session, Aussie stocks finished slightly lower as the heavily weighted banks weighed. A late retreat left the S&P/ASX 200 settle down -0.07% after Tuesday’s +0.03% gain. In S. Korea, the Kospi index edged up +0.51% overnight while the market awaits the outcome today’s Fed meeting, despite fears of an escalation in U.S-China tariff war.

In China, stock selling accelerated, leaving the market a noted regional underperformer earlier today. After posting its best month since January with a +1% gain, the Shanghai Composite slid -1.8% to log its worst day in three-weeks, while the Shenzhen Composite fell -1.7%. Weighing again were vaccine makers and as the Sino-U.S trade war looked set to escalate with the threat of higher U.S tariffs.

In Hong Kong, shares ended lower also, dragged by property developers, and as weak data and an escalating trade war dimmed the outlook for growth in the mainland. At close of trade, the Hang Seng index was down -0.85%, while the China Enterprises Index lost -0.5%.

In Europe, regional bourses trade mixed in a range bound trade with the FTSE 100 an outlier trading over -0.6% lower, weighed down by mining names.

U.S stocks are set to open little changed.

Indices: Stoxx600 -0.2% at 390.8, FTSE -0.8% at 7681 DAX -0.1% at 1278, CAC-40 +0.1% at 5518, IBEX-35 -0.3% at 9840, FTSE MIB -0.5% at 22101, SMI Closed, S&P 500 Futures flat

2. Oil under pressure on U.S inventories, OPEC supply, gold lower

Oil prices have slipped again this morning pressured by a market report yesterday that U.S stockpiles of crude rose unexpectedly and by higher OPEC production, adding to indications of abundant supply.

Brent crude prices fell -85c to +$73.36 a barrel, while U.S crude is down -73c at +$68.03.

Note: Last month, Brent fell more than -6% and U.S crude slumped about -7%, the biggest monthly declines for both benchmarks in 24-months.

Yesterday, the American Petroleum Institute (API) said crude inventories rose by +5.6M barrels last week. The market was expecting a decrease of -2.8M.

Expect dealers to take their cues from today’s EIA report at 10:30 am EDT.

Ahead of the U.S open, gold prices are lower, pressured by a stronger U.S dollar on rising trade war fears and ahead of today’s Fed rate announcement. Spot gold is down -0.2% at +$1,220.77 an ounce. The yellow gained slightly on Tuesday on a weaker USD/CNH after a report that the U.S and China were trying to restart negotiations to defuse a potential trade war. U.S gold futures are -0.3% lower at +$1,220.10 an ounce.

3. Sovereign yields look to back up

Fed fund futures are currently pricing in an 80% chance of a rate hike in September and a “hawkish” FOMC statement that echoes the optimism of Fed Chair Powell will leave the market convinced that there will be at least one and possibly even two more rounds of tightening this year – December is the final candidate.

Today’s Fed statement will most likely highlight the underlying strength of the economy and the uptick in inflation and a ‘hawkish’ Fed should also raise the markets hopes that Friday’s non-farm payroll (NFP) report will be strong with wage growth rising and the unemployment rate falling.

Elsewhere, Japan’s benchmark 10-year JGB yield has backed up to +0.131%, an 18-month high as the fixed income dealers test the BoJ’s resolve after the central bank said it will allow for greater flexibility in yield moves.

Earlier this morning, the Reserve Bank of India (RBI) raised its repurchase rate by +25 bps to +6.50% as expected and leaves its cash reserve ratio (CRR) at +4%. The decision was not unanimous – 5:1 vote. Tomorrow, in the U.K, Governor Carney is expected to hike interest rates by +25 bps despite ongoing Brexit worries.

4. Will the Fed impact the dollar?

Today’s Fed rate announcement is not expected to have a material impact on the USD outright. No rate rise is expected until September (odds of +80% already baked in) as domestic U.S data has not changed much since the forecast update at the June meeting.

For the Fed, its challenge going forward is communication – how will Powell and company move away from regular rate rises without their actions being interpreted as a sign of a weaker growth outlook?

The Fed has been raising rates every three-months, but with rates currently between +1.75% and +2.0%, they are encroaching on the “neutral” rate of +3% quickly.

Note: There is no press conference today, maybe it will be explained away next month.

Elsewhere, summer holidays are kicking in and that leads to ranges consolidating, something we have been witnessing over the past fortnight. EUR (€1.1679) CHF ($0.9920) and GBP (£1.3113) are little changed outright and today’s FOMC decision is seen as unlikely to buckle the trend.

However, USD/JPY (¥112.00) continues to move higher, supporting the “carry-trade” after Tuesday’s BoJ rate decisions and the bank’s pledge to keep interest rates “extremely low” for an extended time.

5. U.K manufacturing starts Q3 on softer footing

Data this morning from Markit showed that U.K Manufacturing PMI were at a three-month low in July. There were weaker increases in both output and new orders and intermediate goods production falls for first time in two- years. Price pressures also remained elevated as a strong increase in average input costs led to the steepest rise in selling prices in four-months.

The seasonally adjusted IHS Markit/CIPS PMI fell to 54.0 in July, down from 54.3 in June and well below the highs achieved around Dec/Jan of this year. The PMI remains comfortably above its long-run average of 51.8.

Last month saw the weakest rate of expansion in U.K manufacturing output in 16-months, as production growth was hindered by an easing in the pace of increase in new orders.

Digging deeper, the domestic market was the main focus of the slowdown in new business growth, as new export work increased at the fastest pace for six months.

Forex heatmap

Dollar Higher Ahead of Fed Meeting OANDA Market Beat Podcast

OANDA Senior Market Analyst Alfonso Esparza reviews the major upcoming market news, macro analysis and economic indicator releases that will impact currencies, stocks other asset classes. Joining him this week is OANDA’s Vice President of Research Dean Popplewell

Subscription available on iTunes https://goo.gl/TZEWRW and GooglePlay https://goo.gl/cRBk39. Tune in every Tuesday and don’t miss a beat as we cover the hottest trends impacting the markets in the week ahead. Trading is high risk. Losses can exceed investment.

Dollar Higher After Trump Administration Reopens Talks with China

The US dollar rose on Tuesday after American inflation data was in line with expectations and consumer confidence came out higher than forecasted. The U.S. Federal Reserve wraps up its two day Federal Open Market Committee (FOMC) meeting on Wednesday at 2:00 pm EDT. The market is not anticipating a major change from the language on the rate statement or the interest rate itself. The September Fed meeting has been priced in for another rate hike as the Fed continues its path toward monetary policy normalization. The private payrolls report from the ADP is expected to show a gain of more than 180,000 jobs and serve as the preamble to the biggest indicator release in the market the U.S. non farm payrolls (NFP) due on Friday.

  • ADP forecasted to add 186,000 jobs
  • Fed to hold interest rates unchanged
  • Central bank week continues with the BoE on Thursday

Dollar Rebounds Ahead of FOMC
The EUR/USD fell on Tuesday. The single currency is trading at 1.1689 after breaking above the 1.17 price level on positive European indicator releases during the European session. The USD started gaining traction with the release of inflation data and higher consumer confidence numbers but it was the reports that the US and China are trying to meet to discuss trade that boosted the currency. Private conversation are said to be ongoing with a goal of having ministerial meetings that have been on hold since the trade war rhetoric escalated.



The U.S. Federal Reserve is not expected to modify its monetary policy on Wednesday and without a press conference the focus will be on the language changes in the statement. The Fed has already hiked twice in 2018 and policy members have talked about two more interest rates lift if the economy continues on its current growth path. President Trump has already commented that he is not a fan of the Fed’s decision to keep driving interest rates higher. Chair Powell has so far avoided commenting outside of the central bank’s mandate and this week there won’t be a chance for the financial press to seek his opinion on the matter of the Fed’s independence.

Bank of Japan (BOJ) Underwhelms Sends Yen Lower

The USD/JPY rose on Tuesday after the Bank of Japan (BOJ) kept most of its monetary policy intact, but will allow a wider band on its bond yields as well as the use of forward guidance. BOJ Governor Haruhiko Kuroda said that rates will remain low for an extended period of time. The central bank remains committed to a lofty 2 percent inflation target and has not reached it despite a massive QE program that has been going on for 5 years. Mr Kuroda closed the door to speculation that the BOJ would exit QE.



Investors were underwhelmed by the BOJ’s decision with the currency pair climbing to 111.87 on its way to break the 112 price level. All eyes will be on the U.S. Federal Reserve and its statement on Wednesday. The Fed will follow the BOJ in this busy week with little changes expected, but in current market conditions small tweaks could have big consequences for currencies.

Strong GDP Boosts Canadian Dollar

The Canadian dollar appreciated versus the US on Tuesday after the stronger than expected monthly GDP report. The Canadian economy expanded at a 0.5 percent rate in May versus the anticipated 0.3 percent. The higher annual pace of growth came in at 2.6 percent and has increased the possibility of another rate hike this year, appreciating the loonie versus the greenback on the North American trading session. Oil prices fell below $70 as the US dollar recovered with the announcement of new trade talks between the US and China.



The US dollar staged a comeback after the announcement of lower trade tension between China and the United States. The currency pair touched a session low of 1.3010 at 8:30 am, but is now back at 1.3016 after sources indicated that US Treasury officials and China Vice Premier representatives intend to meet.

The NAFTA and EU-US trade conversations both had positive sound bites this week. Incoming Mexican President was eager for a quick NAFTA renegotiation and he was echoed by the Trump administration. Canada and Mexico made sure to be clear that a trilateral negotiation is needed as the US has been pushing for two bilateral sit downs.

Yesterday US Commerce Secretary Wilbur Ross said that NAFTA talks are close to a deal, specially with Mexico. The latest strategy by the US has been to move faster on talks with its southern neighbour with a new incoming government. Mexico and the US will hold ministerial talks on Thursday in Washington. Canadian officials tried to be part of the meeting but were rejected by the US.

Market events to watch this week:

Wednesday, August1
4:30am GBP Manufacturing PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
2:00pmUSD Federal Funds Rate
Thursday, August2
4:30am GBP Construction PMI
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
7:30am GBP BOE Gov Carney Speaks
Friday, August3
4:30am GBP Services PMI
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate
10:00am USD ISM Non-Manufacturing PMI

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

BoJ’s new script supports the carry-trade

Tuesday July 31: Five things the markets are talking about

Sovereign government bonds prices have rallied overnight as the Bank of Japan (BoJ) again committed to keep its “ultra-loose” monetary policy intact.

As expected, Japanese policy makers tweaked some policies, but signalled rates to stay low for an “extended period of time.”

In respect to the long-term rates, the BoJ reiterated that it would continue to buy JGB’s to keep their 10-year yield at about +0%, but added that “while doing so, the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices.”

Elsewhere, global equities have been trading somewhat mixed as corporate earnings reporting continues – all market eyes will be on Apple’s Q2 results today after the close.

From a central bank monetary policy perspective, next up will be the Fed (Aug 1) and the Bank of England (Aug 2). Capital markets will be looking for confirmation that U.S policy makers plan two more interest-rate hikes before year-end, while in the U.K, Governor Carney is expected to hike interest rates by +25 bps despite ongoing Brexit worries.

Commodity prices are under pressure after China’s manufacturing PMI’s fell this month (51.2 vs. 51.5 m/m) as the first-round of U.S tariffs begin to have an impact.

On tap: U.S personal spending and income data for June will be released. On Friday, it’s U.S non-farm payrolls (NFP), which is expected to show a healthy labor market with +193K new jobs, and an unemployment rate slipping back to +3.9%.

1. Stocks mixed results

Global stocks are broadly steady, but mixed overnight, after U.S tech share losses yesterday.

In Japan, the Nikkei share average ended flat, rebounding from a one-week low after the BoJ tweaked its monetary policy settings, but refrained from making any radical moves. The benchmark Nikkei inched up +0.04%, while the broader Topix fell -0.84% as bank shares fell on profit-taking after the rate decision.

Down-under, Aussie shares found support Tuesday, mostly supported by BHP. The S&P/ASX 200 rallied +0.03%, holding atop of its multi-year highs, to close out for a fourth consecutive month of gains. In S. Korea, the Kospi inched higher, closing out the month +0.08% in the ‘black.”

In Hong Kong, the Hang Seng index ended down overnight, following the U.S tech sector lower. At the close of trade, the index was down -0.52%, while the Hang Seng China Enterprises index closed -0.2% lower.

In China, stocks closed higher, aided by gains in real estate and energy firms, while the market response to the country’s manufacturing data has been relatively muted – the data clearly reports a slowdown in economic momentum. The blue-chip CSI300 index ended +0.1% higher, while the Shanghai Composite Index closed +0.3% firmer.

In Europe, regional bourses are trading mixed in a range bound trade, while in the U.S stocks are set to open in the ‘black” (+0.2%).

Indices: Stoxx600 +0.1% at 391.2, FTSE +0.1% at 7711 DAX +0.1% at 12811, CAC-40 flat at 5492, IBEX-35 +0.5% at 9905, FTSE MIB +0.6% at 22080, SMI +0.2% at 9183, S&P 500 Futures +0.2%

2. Oil prices drop on oversupply worries, gold unchanged

Oil prices fell overnight, with Brent futures set for their biggest monthly loss in two-years, as oversupply concerns rose on reports that OPEC’s output rose in July to its highest for 2018.

September Brent crude futures fell -25c, or -0.3% to +$74.72 a barrel after rising nearly +1% yesterday. U.S West Texas Intermediate crude futures (WTI) are down -24c, or -0.3% at +$69.88 a barrel, after rising more than +2% on Monday.

Note: For the month, Brent futures are set to drop -6%, while WTI futures are set to decline -5.8%.

A Thomson Reuters survey showed that OPEC increased production by +70K bpd to +32.64M bpd in July, the most this year – to offset the loss of Iranian supply as U.S sanctions have already started to cut exports from the world’s third-largest producer.

Ahead of the U.S open, gold prices are steady, trading within a tight range as the market adopts a “wait-and-see” approach ahead of the Fed’s two-day monetary policy meeting, commencing today. Spot gold is up about +0.1% at +$1,222.15 an ounce, while U.S gold futures are -0.1% lower.

3. Euro zone bond yields edge up after inflation beats expectations

Eurozone government bond yields are edging higher this morning, after preliminary data showed that inflation was higher than expected in July.

Headline consumer inflation accelerated to +2.1% from +2.0% in June, while core-inflation rose to +1.3% from +1.2% in June.

Germany’s 10-year government Bund yield has backed up to +0.44%, while other euro zone bond yields have come off their lows, rising about +1 bps across the board.

This Thursday, the Bank of England (BoE) is expected to hike +25 bps. However, market expectations are looking for a split vote of perhaps 6-3 in favour of a rate rise – some members are likely to continue favouring waiting to see how the data develops.

Note: The market is pricing in an almost +90% odds for a hike.

Elsewhere, the yield on U.S 10-year notes has declined -2 bps to +2.95%, the lowest in a week, while in the U.K, the 10-year yield has declined -2 bps to +1.343%, the biggest fall in more than a week.

4. Dollar’s mixed results

The yen (¥111.51) is a tad weaker after the BoJ’s policy decision overnight. The bank has stressed a “prolong period of extremely low rates” or in other terms further “policy stimulus” in its first-ever forward guidance. Technically, the statement is encouraging for long-term investors to consider adding to their ‘carry-trade’ positions.

Elsewhere, a plethora of mixed European data (see below) is supporting the EUR (€1.1724). Nevertheless, the pair remains confined to its tight summer trading range. This morning’s mixed data will do little to persuade the ECB to move away from its current stimulus objectives.

5. Eurozone economy slows further

Data this morning showed the eurozone’s economy slowing further in Q2, as exports and business confidence both weakened on trade relations concerns.

Eurostat said that compared with Q1, the eurozone’s GDP was +0.3% higher, the weakest expansion in two-years, and year-over-year, it was +2.1% higher.

Note: The U.S/E.U growth differential is the widest in four-years. Stateside, economic growth was +4.1% q/q.

Consumer confidence is expected to rebound if there is progress in talks to resolve trans-Atlantic tensions.

Higher oil prices are another obstacle. The ECB confirmed last week that it would proceed with plans to end QE in December, but a “lengthening period of weaker growth may make it reluctant to hike rates next year.”

Other data this morning released showed the annual rate of inflation rose to +2.1% in July, further above the ECB’s target and that the unemployment rate across the eurozone was steady at +8.3% in June, but the number of people without work rose slightly for the first time in 12-months.

Forex heatmap

G7 FX moves look to central banks for direction

Monday July 30: five things the markets are talking about

Stocks begin a new week under pressure, as investors mull over some lofty corporate earnings and a number of key policy meetings.

A host of G10 central banks are on tap to offer their monetary policy decisions – the Bank of Japan (BoJ), Reserve Bank of India (RBI), Bank of England (BoE) and the Federal Open Market Committee (FOMC).

Up until last week, capital markets were not expecting any changes to the BoJ’s policy. Nonetheless, Japanese policy committee are supposedly mulling over some adjustments to policy to help their banking sector – 10-year JGB yields have backed up from +0.035% to +0.10% in anticipation of tomorrow’s announcement.

Elsewhere, the BoE is expected to increase its policy rate by +25 bps even amid Brexit gloom, while the RBI is 50/50 on higher rates. The Fed is expected to leave its fed funds rate unchanged. However, look for any indications that U.S policy makers are shying away from two-more interest-rate hikes before the end of this year.

In currencies, the onshore yuan extended last week’s slump, while the ‘big’ dollar ticked higher alongside U.S Treasury yields as metals decline while crude oil prices advance.

On the fundamental front, it’s a heavy week for economic data with the week ending with Friday’s U.S non-farm payrolls (NFP).

On tap: BoJ monetary policy (July 30/31), CAD GDP, U.S consumer confidence & NZD employment (July 31), Fed monetary policy, GBP manufacturing PMI & AUD Trade balance (Aug 1), BoE monetary policy, U.K inflation report & AUD retail sales (Aug 2), CAD Trade balance & U.S non-farm payroll (NFP) (Aug 3)

1. Stocks see ‘red’

In Japan, stocks closed lower overnight as possible changes this week in the BoJ’s monetary policy weighed on sentiment, while quarterly earnings were also in focus. Japan’s Nikkei share average closed down -0.74%, while the broader Topix fell -0.43%.

Down-under, Australia’s S&P/ASX 200 closed down -0.4% following Friday’s 11-year closing high, with health care down -1.1%. In S. Korea, the Kospi stock index and the won weakened overnight ahead of key central bank meetings and U.S inflation and payrolls data. At close, the index was down -0.06%.

In Hong Kong and China, stock indexes closed weaker overnight, pressured by a slump in healthcare shares. In Hong Kong, the Hang Seng index ended down -0.25%, while the Hang Seng China Enterprises index was unchanged. In China, the blue-chip CSI300 index fell -0.2%, while the Shanghai Composite Index slipped -0.1%.

In Europe, regional bourses trade a tad lower, tracking their Asian counterparts as bond yields rise.

U.S stocks are set to open in the ‘red’ (-0.1%).

Indices: Stoxx600 -0.2% at 391.2, FTSE -0.2% at 7683 DAX – 0.2% at 12831, CAC-40 -0.40% at 5492, IBEX-35 flat at 9870, FTSE MIB -0.1% at 21,932, SMI +0.1% at 9183, S&P 500 Futures -0.1%

2. Oil prices edge higher but trade row caps gains, gold lower

Oil prices are better bid with the U.S benchmark WTI moving higher after a month of declines, but gains remain capped as the fallout from trade tensions weigh on markets.

Brent crude futures rose +13c, or +0.2% to +$74.42 – it rose +1.7% last week, the first gain in four. U.S West Texas Intermediate (WTI) crude futures are up +31c, or +0.5%, at +$69 a barrel. WTI fell -1.3% on Friday.

The U.S economy grew at its fastest pace in nearly four-years in Q2, but trade tensions remain high between U.S and China despite an easing between the U.S and the E.U.

Last Thursday, Saudi Arabia said that it was “temporarily halting” all oil shipments through the strategic Red Sea shipping lane of Bab al-Mandeb after an attack on two oil tankers by Yemen’s Iran-aligned Houthi movement.

Note: An estimated +4.8M bpd of crude oil and refined petroleum products flow through this waterway towards Europe, the U.S and Asia.

According to Baker-Hughes data last week, U.S. energy companies added three oilrigs in the week to July 27, the first time in the past three weeks that drillers have increased activity.

Ahead of the U.S open, gold prices have eased a tad on a former U.S dollar ahead of key central bank meetings and U.S inflation and payrolls data this week. Spot gold is down about -0.3% at +$1,219.70 an ounce. U.S. gold futures are also -0.3% lower at +$1,219 an ounce.

3. Yields back up

Japanese government bond prices fell overnight, with the benchmark 10-year yield touching its highest level in 18-months as the market tries to test the BoJ’s intention ahead tomorrow’s decision.

Higher yields has forced the BoJ to conduct a “special bond buying operation” to stem rising bond yields amid growing expectations that Japanese policy makers could adjust its policy. On Friday the BoJ lowered the yield to +0.10% – still, the 10-year JGB yield rose to as high as +0.11% earlier this morning, in defiance of the BoJ’s apparent defence line.

Note: Some believe that the BoJ could possibly announce it would allow larger moves in the JGB market by loosening its interpretation of its policy target of “around zero percent” in the 10-year yield.

Elsewhere, the yield on 10-year Treasuries rallied +1 bps to +2.96%. In Germany, the 10-year yield decreased -1 bps to +0.40%. In the U.K, the 10-year yield fell -1 bps to +1.282%, the biggest fall in more than a week.

4. Dollar in control

Major currency pairs are trading in a tight range as the markets focus turns to central bank meetings this week.

EUR/USD (€1.1663) is steady as a plethora of German States reports their July CPI data, which for the most part saw the year-over-year above the consensus for the national reading. The ‘single’ unit could not find much traction, despite the 10-year Bund hitting a six-week high near +0.43%.

USD/JPY (¥111.10), again its steady and holding above the psychological ¥111 handle ahead of tomorrow’s BoJ rate decision. Overnight, the BoJ conducted a fixed-rate JGB Bond Purchase operation – an unlimited amount of 5 to 10-year JGB’s at +0.10% (its third operation within the past week).

Elsewhere, the EUR/SEK (€10.2419) fell by -0.6% as Sweden Q2 preliminary GDP beat expectations and kept the timeframe intact for the Riksbank to hike rates around year-end.

5. U.K consumer lending stable in June

U.K data this morning showed that the British consumer borrowing remained broadly stable last month, which would suggest another month of steady growth in household spending.

Bank of England (BoE) data showed banks lent £5.4B to consumers in June, net of repayments, a touch higher than the £5.3B in May.

Borrowing on credit cards and other unsecured forms of lending was flat at £1.6B, while mortgage lending inched higher.

Digging deeper, the number of new home loans approved by lenders in June also rose compared with May, to +65,619.

Note: An uptick in mortgage lending offer signs that potential homeowners may be seeking to finalize their purchases before further hikes in borrowing costs this week.

The BoE is expected to lift its benchmark interest rate to +0.75% (Aug 2).

Forex heatmap

Dollar Mixed Ahead of Busy Week in the Market

The US dollar is mixed on Friday against major pairs. The US economy grew at a 4.1 percent pace on the second quarter according to the first estimate. The number came in right on the forecast which had no positive effect for the USD, but it did validate the U.S. Federal Reserve decision to keep a tighter monetary policy with two more rate hikes in the horizon this year. The week from July 30 to August 30 will be full to the brim featuring monetary policy announcement from the Bank of Japan (BOJ) the Fed, the Bank of England (BoE) and the release of jobs data in the United States.

  • US Fed forecasted to stand pat on Wednesday
  • Bank of England (BoE) expected to hike by 25 bps
  • US could have added close to 200,000 jobs in July

EUR Falls on Dovish ECB and Political Tension

The EUR/USD lost 0.51 percent in the past five days. The single currency is trading at 1.1659 after the European Central Bank (ECB) did not provide any additional information at the end of its monetary policy meeting in July. The statement was almost a word for word recreation of the June document offering no insights for investors on when the central bank is willing to start lifting rates. The growing gap between US interest rates and European rates and an impressive growth rate in the second quarter in America gave the edge to the US dollar.



US President Trump said on Friday that the US will beat the current pace of growth going forward. The strong fundamental data will be vital for Republicans as they face midterm elections in the fall. Politics in Europe continue to add uncertainty as Italy’s Five Star founder once again is seeking a referendum on euro membership.

The U.S. Federal Reserve is not expected to announce any changes on Wednesday when it wrap up its August meeting. The next rate move is expected in September, which a more than 90 percent probability of a hike if inflation and growth continue in their current trends.

Loonie Rises on NAFTA Optimism

The USD/CAD lost 0.64 percent in the last week. The currency pair is trading at 1.3058 in a week that saw trade war concerns ease. The NAFTA and EU-US trade conversation both had positive sound bites this week. Incoming Mexican President was eager for a quick NAFTA renegotiation and he was echoed by the Trump administration. Canada and Mexico made sure to be clear that a trilateral negotiation is needed as the US has been pushing for two bilateral sit downs.


Canadian dollar weekly graph July 23, 2018

The loonie reached its higher level in six weeks on Wednesday amidst rising oil prices despite multiple evidence of ample supply. Disruptions in Saudi Arabia and the ongoing uncertainty with Iranian crude continue to push prices higher.

The main Canadian economic events during the week will be the release of the monthly GDP report on Tuesday and the Trade balance on Friday.

Yen Higher Ahead of Bank of Japan

The USD/JPY lost 0.43 percent in the last five trading sessions. The currency pair is trading at 110.95 ahead of the July 31 Bank of Japan (BOJ) policy meeting. The central bank has remained on the sidelines for most of the year and its most active contribution was to remove inflation targeting in April. The BOJ has in place an easing monetary policy that includes bond buying to keep 10 year bond yields under control.



There is a possibility that the BoJ will change the extreme form of its QE program on Tuesday, but it remains small given the lack of strong economic indicators out of Japan. Inflation continues to struggle and the economy contracted in the first quarter of 2018 so at this point it remains unlikely that the Bank of Japan would join the group of central banks who are scaling back their quantitive easing efforts.

GBP Awaiting BoE Rate Hike

The GBP/USD lost 0.08 percent during the week. The currency pair is trading at 1.3116 amid political tension due to Brexit with three consecutive weekly losses. The Brexit deal that was presented to the EU, a hard fought battle for Prime Minister Theresa May and for which hard core Brexiteers resigned, was knocked back by EU Brexit negotiator Michel Barnier. Key elements were rejected outright, even both parties still cling to an October deal.



The GBP lost despite heavy anticipation of a rate hike by the Bank of England (BoE) on super Thursday. The market is pricing in a 81 percent probability of a 25 basis points rate lift to 0.75 percent. Last meeting there were three dissenters that opposed holding rates. Despite a higher interest rate the comments from Bank of England Governor Mark Carney will be in focus as he could add a dovish tone as political uncertainty will surely make the job of protecting the UK economy harder.

Market events to watch this week:

Tuesday, July 31
10:00am USD CB Consumer Confidence
Wednesday, August1
4:30am GBP Manufacturing PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
2:00pmUSD Federal Funds Rate
Thursday, August2
4:30am GBP Construction PMI
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
7:30am GBP BOE Gov Carney Speaks
Friday, August3
4:30am GBP Services PMI
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate
10:00am USD ISM Non-Manufacturing PMI

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

U.S dollar firmer on GDP expectations

Friday July 27: Five things the markets are talking about

Euro stocks have found some traction after a mixed performance overnight in Asia, as investors remain upbeat over the tentative trade truce between the U.S and the E.U.

President Trump and E.C Commission President Juncker agreed, in principle, not to impose new tariffs while the two economies sorted out their differences. The truce comes as Sino-U.S trade relations remain on edge.

Aside from corporate balance sheets, capital markets remains focused on trade and central bank policy – BoJ (July 30), Fed (Aug. 1) & BoE (Aug. 2).

Today’s advanced U.S GDP will be an important print (08:30 am EDT) – Trump and his economic team are convinced that the GDP numbers will be strong.

Trumps advisers have been privately telling associates that GDP growth should rise to +4.3% or +4.4% for Q2. The President is even more optimistic, telling anyone who will listen he expects a +4.8% headline – anything close and the president will be accused of leaking data. The danger for the U.S dollar is a weaker headline print below +4%.

This morning’s U.S data may provide support for the Fed’s tightening path, while in Japan, reports suggest the BoJ is debating ways to reduce the side effects of their yield-curve control policy.

Note: The ECB indicated yesterday that it will stick to its plan to end bond purchases and pledged to keep interest rates unchanged “at least through the summer of 2019.”

1. Stocks mixed results

In Japan, equities closed higher overnight, taking solace from signs of reconciliation between the U.S and Europe over trade issues. The benchmark Nikkei share average hit a one-week closing high and ended the week +0.56% firmer. The broader Topix ended +0.57% higher.

Down-under, the Aussie’s stock benchmark topped early July’s best in notching another eleven-year closing high – the S&P/ASX 200 rose +0.9% as BHP Billiton rose +2.3%. In S. Korea, the Kospi cooled following Thursday’s outperformance, but still rose further, allowing the index to narrowly avoid a sixth-decline in seven-weeks. It rose +0.3%, both today and on the week.

In Hong Kong, stocks ended flat as expectations of more stimuli from Beijing offset worries over a China economic slowdown. The Hang Seng index rose +0.1%, while the China Enterprises Index gained +0.2%.

In China, bourses ended down overnight, as investors remain cautious amid concerns over the Sino-U.S trade friction. The blue-chip CSI300 index ended -0.4% down, while the Shanghai Composite Index closed -0.3% lower.

In Europe, regional bourses are pushing higher, continuing the positive momentum, with largely positive earnings helping fuel sentiment.

U.S stocks are set to open ‘unchanged’.

Indices: Stoxx600 +0.1% at 391.1, FTSE +0.2% at 7681 DAX +0.3% at 12846, CAC-40 +0.0% at 5480, IBEX-35 +0.9% at 9866, FTSE MIB +0.3% at 21,932, SMI +0.1% at 9153, S&P 500 Futures flat

2. Oil markets ease after three days of gains, gold higher

Oil prices are a tad lower in quiet trading after three-days of gains, but took support from Saudi Arabia halting crude transport through a key shipping lane, falling U.S stock levels and easing global trade tensions.

Brent futures are down -5c at +$74.49 a barrel – it’s heading for a near +2% gain this week, the first weekly increase in four. U.S West Texas Intermediate (WTI) futures are -5c lower at +$69.56, after rising nearly +0.5%on Thursday. The contract is heading for a -1.3% weekly loss, a fourth-week of declines.

On Thursday, Saudi Arabia said that it was “temporarily halting” all oil shipments through the strategic Red Sea shipping lane of Bab al-Mandeb after an attack on two oil tankers by Yemen’s Iran-aligned Houthi movement.

Note: An estimated +4.8M bpd of crude oil and refined petroleum products flow through this waterway towards Europe, the U.S and Asia.

This week’s EIA report showed that crude inventories fell -6.1M barrels in the week to July 20, compared with a market expectation for a decrease of -2.3M barrels.

Ahead of the U.S open, gold prices have edged a tad higher overnight as the dollar slipped against G10 pairs ahead of U.S GDP data that could shed light on the pace of rate hikes stateside. Spot gold is up +0.1% at +$1,223.96 an ounce. U.S gold futures, for August delivery are -0.2% lower at +$1,223.20 an ounce.

Note: The ‘yellow’ metal is on track for its third consecutive weekly decline.

3. Euro yields barely move

Eurozone government bond yields have barely moved in this week’s post-ECB meeting environment, even as the central bank stopped short of providing details on reinvestments. The 10-year Bund yield is trading at +0.40%, unchanged on the day.

Note: Later this morning, both France and Spain are scheduled to announce details of their respective auctions for next week.

Stateside, U.S bond prices are a tad weaker, falling after the ECB said it would hold its benchmark interest rate steady and the U.S. reported progress on a revamped Nafta agreement.

The yield on the benchmark 10-year Treasury note is at +2.975%, up from 2.936% Thursday.

Yesterday, Draghi confirmed the ECB’s plans to gradually phase out easy-money policies, but signalled the central bank would likely hold interest rates steady until the end of next summer. The move continues to highlight a widening policy divergence with the Fed.

4. Dollar firmer on GDP expectations

The USD is firmer on high expectations for this morning’s U.S Q2 GDP with some speculation of a +4.4 to +5% print.

After this morning’s release, the markets focus will quickly shift to next week’s BoJ’s policy meeting (July 30/31), which could prove to be significant for the JPY (¥111.19) as some analysts believe that BoJ could opt to raise the 10-year government bond yield target from +0.0% to +0.1%. Nevertheless, the majority believes that Japanese policy makers will keep its policy steady after authorities again conducted a fixed-rate JGB Bond purchase operation (second operation this week) to keep their yield control target around +0.00%.

EUR/USD (€1.1625) trades sideways in the aftermath of the ECB policy decision with the pair remaining stuck in the tight €1.16-1.17 range it has been for the past month.

5. French consumer spending sluggish in June

Data this morning showed that French consumer spending was lethargic last month, with household expenditure staying ‘virtually flat,’ according to statistics agency Insee.

Digging deeper, consumer spending rose +0.1% on month in June, well below market expectations for a rise of +0.5%.

Spending was up +0.3% on year – the agency also revised May’s figure for household expenditure on goods to +1.0% from +0.9%. Consumption in food and energy was stable in June, with a slight rise in engineered goods and a slowdown in durables.

Forex heatmap

Trump and Juncker to set the dollar’s tone

Wednesday July 25: Five things the markets are talking about

Euro equities have found some support, following Asian stocks as earnings season continues, although trade tensions remain to the fore ahead of today’s meeting between President Trump and E.C chief Jean-Claude Junker.

Most G10 currency pairs trade in a tight range awaiting today’s development from the U.S/EU meeting. In fixed income, most U.S Treasuries prices have edged a tad higher along with E.U government bonds.

Markets are struggling to build on Tuesday’s upbeat session as trade relations worries between the world’s biggest economic powers return to the fore.

Elsewhere, the AUD (A$0.7419) has had a mixed reaction with G20 currency pairs after inflation data missed estimates last night, backing the case for the Reserve Bank of Australia (RBA) to keep interest rates at a record low. The pound (£1.3155) is currently on to gains initiated by PM May taking control of Brexit talks.

In commodities, crude prices are higher, supported by lower inventory levels.

On tap: As the week continues, more corporate earnings come on line, while the ECB’s monetary policy will be the markets focus on Thursday. On Friday, Trump and his economic team are increasingly convinced the GDP numbers will be strong – he expects Q2 GDP to rise to as much as +4.8%!

1. Stocks get the green light

Overnight, Japanese stocks rallied for a second consecutive session, supported by gains in steelmakers and metal producers, as the market welcomed China’s pledges of a more forceful fiscal policy.

The benchmark Nikkei share average rallied +0.46%, expunging a significant of Monday losses on hearsay reports that the BoJ may adjust its policy at next weeks monetary policy meeting (July 30/31). The broader Topix gained +0.47%.

Down-under, Aussie stocks underperformed as the major banks faltered again following a soft CPI print. The S&P/ASX 200 fell -0.3%, with only the resources sectors showing a meaningful gains, supported by higher commodity prices. In S. Korea, the Kospi struggled overnight, barely getting back into positive territory. The benchmark fell -0.3% to move back toward its 14-month lows. Drug stocks were a noted sore point, while tech stocks eliminated those declines.

In Hong Kong, stocks rallied overnight led by the energy sector as investor sentiment improved on signs that the PBoC is loosening monetary and fiscal policies to prevent a domestic economic slowdown. The Hang Seng index rose +0.9%, while the China Enterprises Index also gained +0.9%.

In China, equities ease after three-straight days of gains. The blue-chip CSI300 index ended down -0.1% while the Shanghai Composite Index also eased -0.1%.

In Europe, regional bourses trade mixed amid another busy day for earnings.

U.S stocks are set to open in the ‘red’ (-0.1%).

Indices: Stoxx600 -0.1% at 388.0, FTSE -0.6% at 7659, DAX -0.2% at 12662, CAC-40 +0.2% at 5444, IBEX-35 -0.3% at 9742, FTSE MIB +0.1% at 21,897, SMI +0.1% at 9016, S&P 500 Futures -0.1%

2. Oil rises as U.S crude inventories fall, gold higher

Oil prices remain supported after U.S data yesterday showed that domestic crude inventories fell more than expected last week, easing worries about oversupply.

Global benchmark Brent crude was up +50c, or +0.7% at +$73.94 a barrel, after gaining +0.5% yesterday. U.S light crude is +5c higher at +$68.57, having risen nearly +1% in its previous session.

API data yesterday showed that U.S crude inventories fell by -3.2M barrels in the week to July 20 to +407.6M barrels. Consensus was expecting a decrease of -2.3M barrels.

Dealers will take their cues from today’s DoE report (10:30 am EDT).

Ahead of the U.S open, gold prices have inched higher as the ‘big’ dollar held steady ahead of today’s U.S and E.C meetings. Spot gold is up +0.2% an ounce. U.S. gold futures for August delivery are +0.1% higher.

3. Yields play in a tight range

Most sovereign bond yields continue to consolidate as dealers search for fresh impetus to head in a new direction. The economic calendar provides no new hints ahead of tomorrow’s ECB meeting.

However, today’s meeting between E.C Commission President Jean-Claude Juncker and President Trump could fuel further trade concerns, while cross-market themes and the lack of market liquidity can still provide erratic price moves.

The yield on U.S 10-year Treasuries has dipped -1 bps to +2.94%. In Germany, the 10-year Bund yield has fallen -1 bps to +0.39%, while in the U.K, the 10-year Gilt yield has decreased -1 bps to +1.264%.

4. FX markets trade sideways

The FX market trades in a tight range ahead of the today’s key Trump/Juncker trade talks stateside.

The EUR/USD (€1.1703) is slightly higher, but contained within this months trading range. E.U data continues to take the back-stage ahead of tomorrows ECB policy decision.

Note: The ECB is widely expected to leave its key policy settings and guidance unchanged after it announced its plans for monetary policy beyond September last month

USD/JPY (¥111.14) is holding above the psychological ¥111 level as fixed income dealers price-in that the BoJ would not likely make any policy changes until at least October.

Elsewhere, China is letting the yuan slide primarily to combat a slackening economy, as the government rolls out more pro-growth measures amid an intensifying trade feud with the U.S.

5. German July Ifo business expectations lowest in four-months

German data this morning revealed that domestic business expectations fell further this month, albeit only marginally, according to the Ifo Institute’s monthly survey.

While the Ifo measure of the current business situation improved a bit, the expectations component hit its lowest level in two-years.

The Ifo business-climate index fell to 101.7 from 101.8 in June.

Note: It marks the lowest reading in 16-months.

“The German economy continues to expand, but at a slower pace,” said Clemens Fuest, the president of the Ifo Institute.

Digging deeper, uncertainty about global trade policy remains high, with potential tariffs on the auto sector being a key concern for Germany.

Forex heatmap