U.S unemployment insurance weekly claims

In the week ending August 4, the advance figure for seasonally adjusted initial claims was 213,000, a decrease of 6,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 214,250, a decrease of 500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 214,500 to 214,750.

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending July 28, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending July 28 was 1,755,000, an increase of 29,000 from the previous week’s revised level. The previous week’s level was revised up 2,000 from 1,724,000 to 1,726,000. The 4-week moving average was 1,745,250, an increase of 3,000 from the previous week’s revised average. The previous week’s average was revised up by 500 from 1,741,750 to 1,742,250.

Read more Department of Labor

Turkish lira loses another 3%

Thursday August 9: Five things the markets are talking about

The geopolitical tension theme continues to dominate capital markets, now that China has responded to the U.S’s tariff onslaught with additional tariffs of its own.

In currencies, the market is again focused on sterling (£1.2852) as it encroaches on its new 12-month low as politics continues to provide the overriding direction for the currency.

And then there is the Turkish lira ($5.4210) as it makes it way towards record lows on market worries about President Erodgan’s grip on monetary policy and on a deepening dispute with the Trump administration.

Down-under, the kiwi (NZ$0.6645) has plummeted to a two-year low after the Reserve Bank of New Zealand (RBNZ) pushed out its forecast for a rate increase.

Elsewhere, oil has extended its drop as trade tensions again overshadow a decline in U.S crude stockpiles. Most industrial metals gained, while gold prices ease.

1. Stocks mixed reaction on low volumes

In Japan, the Nikkei edged lower overnight as a stronger yen (¥111.00) impeded investor risk appetite. Not helping was the auto sector, which saw a sell-off on news that certain automakers improperly conducted vehicle inspections in the domestic market. The Nikkei share average dropped -0.2%, while the broader Topix lost -0.3%.

Down-under, Aussie shares rallied overnight on a stronger earnings season. The S&P/ASX 200 index rose +0.5%. In S. Korea, the Kospi stock index produced a small gain, rallying +0.10%.

In Hong Kong and China, shares ended higher as tech firms rally on hopes of China policy boost. The Hang Seng index was up +0.88%, while the Hang Seng China Enterprises index rose +1.09%. In China, the Shanghai Composite index ended +1.9% higher, while China’s blue-chip CSI300 index closed up +2.5%.

In Europe, regional bourses are trading mostly lower in quite trading. U.S stocks are set to open little changed.

Indices: Stoxx600 -0.2% at 388.8, FTSE -0.6% at 7729, DAX 0.0% at 12633, CAC-40 -0.2% at 5492, IBEX-35 0.0% at 9755, FTSE MIB +0.0% at 21801, SMI -0.3% at 9149 S&P 500 Futures 0.1%

2. Oil finds some support after a -3% drop Wednesday, gold steady

Oil prices are a tad higher after yesterdays steep slide, when the first round of U.S sanctions against Iran came into effect. Not providing much support is investor worries that crude demand will and has been hit by the escalating Sino-U.S trade dispute.

Brent crude futures are up +14c at +$72.42 barrel, after having dropped by more than -3% yesterday. U.S crude futures (WTI) have rallied +8c to +$67.02 a barrel, having closed down -3.2% Wednesday.

With U.S sanctions against Iran, which shipped out +3M bpd of crude in July, officially came into effect on Tuesday and the market is anticipating that supply losses could range from +600K to +1.5M bpd.

Stateside yesterday, the weekly EIA report showed that crude inventories fell -1.4M barrels last week, less than half the -3.3M barrel draw the market had expected and that gas stocks rose by +2.9M barrels, compared with expectations for a drop of -1.7M barrel drop.

Ahead of the U.S open, gold prices are mostly steady in a range-bound overnight session, as a stronger dollar continues to weigh on upside momentum. Spot gold is up +0.1% at +$1,214.23 an ounce, having gained +0.2% Wednesday.

3. RBNZ Extra Cautious

Reserve Bank of New Zealand (RBNZ) Governor Orr left interest unchanged at +1.75% as expected, while moving the timing of any future increase to Q4 in 2020 from Q1 in the same year.

Assistant Governor McDermott indicated that the chance of a rate cut had increased and wanted the market to understand that they needed to see core-inflation above +2% for any rate hike. The direction of the next move could be “up or down,” he says. The cautious comments saw the NZD ($0.6650) weaken by -0.45% outright.

Elsewhere, the yield on 10-year Treasuries decreased -1 bps to +2.95%. In Germany, the 10-year Bund yield dipped -2 bps to +0.39%, while in the U.K, the 10-year Gilt yield also declined -2 bps to +1.299%.

4. Turkish lira loses another 3% outright

The Turkish lira has hit a new record low this morning as it weakens as much as -3% outright on souring relations with the U.S over the detention of an American pastor. USD/TRY is last up +2.3% at $5.3994, after it hit a record high of $5.4488 earlier.

EUR/USD (€1.1596) is holding below the €1.16 level as the techies continue to watch their significant support level at €1.15. A break opens the door for a possible test to €1.10 handle.

GBP (£1.2890) remains on the softer side on a ‘no-deal’ Brexit worries. The pair tested its 11-month low atop of £1.2850 earlier this morning.

USD/JPY (¥111.14) is a tad higher, but stable ahead of the U.S-Japan trade talks that begin in Washington later today.

RUB ($65.88) is weaker by -1%, testing its two-year low outright following the U.S State Department announcement on Russian sanctions related to a chemical agent being used in a U.K spy attack last March.

5. ECB economic bulletin highlight

According to the ECB in its regular economic bulletin released earlier this morning, the risks to global growth are growing.

“Downside risks to the global economy have intensified amid actions and threats regarding trade tariff increases by the United States and possible retaliation by the affected countries,” the ECB said in an assessment.

The ECB added that if all the threatened measures were to be implemented, the average U.S tariff rate would rise to levels not seen in the last 50-years.

Note: A fortnight ago, the ECB kept policy unchanged, staying on course to end its QE program by the close of the year and to raise rates for the first time since the euro zone debt crisis in the autumn of 2019.

Forex heatmap

Saudi Arabia sells off Canadian assets, loonie falls

It’s being reported by FT that the Saudi’s are selling off Canadian assets in response to Ottawa’s criticism of the arrest of a female activist last week.

Apparently, the Saudi central bank and state pension funds have been instructed to dispose of their Canadian equities, bonds and cash holdings.

There is no Canadian dollar amount being proposed, but its believed that Saudi funds have in excess of +$100B invested in overseas markets. Canada’s proportion should be a small percentage.

The loonie has been offered since yesterday, currently trading a tad shy of C$1.3100, down -0.3% at C$1.3082.

Currently, markets have been looking at Canada’s recent economic strength and wondering if Bank of Canada (BoC) is on target to hike rates at next months policy meeting.

Last weeks Canada’s GDP and Trade balance reports beat markets expectations and give CAD/USD a lift to C$1.2967 on Aug 3. Given Governor Poloz’s commitment to moving gradually and his concern over the economy’s sensitivity to rate rises, a September move is becoming more remote, especially without a signed Nafta deal.

Canadian employment

Friday’s Canadian employment numbers should have an impact, especially if we get another strong headline print – +18Ke vs. +31.5K for June. Many are also expecting the unemployment rate to improve a tad to +5.9% vs. +6%.

Politics takes down the pound

Wednesday August 8: Five things the markets are talking about

Trade concerns continue to hover over capital markets. Yesterday, the U.S indicated that it will begin imposing another +25% duties on an additional +$16B in Chinese imports beginning in a fortnight. On the first go around, China swore to retaliate, they have yet to give specifics, but at the very least, it will be an in-kind retaliation.

Data overnight showed that China’s exports grew faster than expected last month and imports surged, which suggest that the “ongoing” trade war has yet to have a material impact on the worlds second largest economy’s bottom line.

Nevertheless, the prospects for a full blown trade war has the U.S dollar remaining better bid on pullbacks in a relative tight summer range.

Sovereign yields, further out the curve, trade a tad higher as dealers make room to take down today’s record amount of 10-year Treasury debt worth +$26B, and an all-time high of +$18B in 30-year bonds tomorrow.

In currencies, the market is focused on sterling (£1.2904) as it encroaches on its 11-month low as politics continues to provide the overriding direction for the currency. And then there is the Turkish lira ($5.2923) as it makes it way towards record lows on market worries about President Erodgan’s grip on monetary policy.

On tap: The Reserve Bank of New Zealand’s (RBNZ) official cash rate decision and monetary policy statement is due this afternoon (05:00 pm EDT). No change in rates or accompanying statement is expected.

1. Stocks mixed overnight session

In Japan, the Nikkei edged lower overnight as the market waits for the start of U.S-Japan trade talks. Will the U.S be taking a hard stance, similar to that of China and Europe? Both the Nikkei and broader Topix ended -0.1% lower.

Down-under, Aussie shares rallied overnight, with financials higher after reporting a smaller fall in profit than expected, and while miners gained on strong import data from China. The benchmark S&P/ASX 200 index rose +0.2%, erasing most of Tuesday’s losses. In S. Korea, the Kospi index rose modestly, closing out 0.06% higher.

In Hong Kong, shares rise on tech and energy boost, but fears of a deeper trade war is capping gains. At close of trade, the Hang Seng index was up + 0.39%, while the Hang Seng China Enterprises index rose +0.32%. In China, the Shanghai Composite index closed down -1.23% while its blue-chip CSI300 index ended down -1.59% mostly on profit taking after Tuesday stellar session.

In Europe, regional bourses trade mostly lower, pressured generally by weaker earnings out of Europe.

U.S stocks are set to open little changed (+0.0%).

Indices: Stoxx600 -0.2% at 389.8, FTSE +0.3% at 7742, DAX -0.2% at 12627, CAC-40 -0.1% at 5517, IBEX-35 -0.10% at 9762, FTSE MIB +0.0% at 21863, SMI -0.4% at 9167 S&P 500 Futures 0.0%

2. Oil dips on weak China imports, but sanctions and weak U.S stocks support

Oil prices have dipped a tad overnight, pressured by Chinese weaker import data, although the market remains well supported on pull backs by falling U.S crude inventories and the introduction of sanctions against Iran.

Brent crude oil futures are at +$74.50 per barrel, down -15c, or -0.2% from Tuesday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$69.15 per barrel, down -2c.

Data shows that China’s July crude oil imports recovered slightly last month after falling for the previous two-months, but are still amongst the lowest due to a drop-off in demand from the independent Chinese refineries.

With U.S sanctions against Iran, which shipped out +3M bpd of crude in July, officially came into effect yesterday midnight and the market is anticipating that supply losses could range from +600K to +1.5M bpd.

Dealers are also focusing on the U.S market, where yesterday’s API data showed that crude inventories fell by -6M barrels in the week to Aug. 3 to +407.2M.

The market will take its cues from today’s EIA inventory report (10:30 am EDT).

Ahead of the U.S open, gold prices are better bid, supported by a mixed U.S dollar. Spot gold is up +0.2% to +$1,213.02 an ounce, after rising +0.4% in Tuesday’s session.

3. Sovereign yields could back up further

Yesterday, the U.S Treasury Department sold +$34B three-year notes and it was the largest three-year auction in eight-years. Later today, the Treasury will sell a record amount of 10-year debt worth +$26B (1:01 pm EDT) and tomorrow an all-time high of +$18B in 30-year bonds. With so many products on offer, dealers are expected to again cheapen up the curve to make room ahead of the deadline.

The yield on 10-year Treasuries has rallied +1 bps to +2.97%, while Germany’s 10-year bund yield is holding steady at +0.403%. In the U.K, the 10-year Gilt yield has rallied +1 bps to +1.314%.

4. Sterling’s Wild West

Trading GBP/USD (£1.2903) is proving to be a bit like the Wild West – unpredictable – the pound is again threatening to penetrate yesterday’s record 12-month low now that its failed to benefit from last week’s Bank of England rate rise. Markets are now turning their attention to the Brexit process, which will likely dominate trends in GBP for the remainder of this year.

The Turkish lira ($5.2920) has recovered some lost ground after plummeting to new record lows Monday ($5.42), helped by the Central Bank of the Republic of Turkey (CBRT) announcing a cut in the foreign exchange reserve requirement ratio (RRR) for commercial banks, a measure which should boost dollar liquidity. However, this week’s necessary course of action reaffirms the central banks reluctance to hike rates. Nevertheless, the plunge in the currency over the past few weeks is now on a scale, which has, in the past, prompted the CBRT to hike interest rates aggressively.

Will the CBRT hike the repo rate this week? They need to, but will they dare defy President Recep Tayyip Erdogan?

Note: A Turkish delegation is visiting Washington this week to discuss the friction between both countries. But the U.S has stated that they remain at odds on its core demand that Turkey free American an evangelical pastor.

5. China’s trade balance tightens

Data overnight showed that China’s trade surplus narrowed sharply in July, with imports surging as trade tensions with the U.S escalated.

China reported a trade surplus of +$28.05B in July, compared with a surplus of +$41.61B in June. The market was expecting a surplus of +$39.10B.

Digging deeper, exports rose +12.2% y/y, following June’s +11.3% increase. The market was looking for a +10% growth number.

Imports were up +27.3% in July y/y, accelerating from a +14.1% increase the previous month.

China’s trade surplus with the U.S. narrowed to +$28.09B in July from a record monthly high of +$28.90B in June.

Forex heatmap

Dollar steady as China trade data looms

The US dollar had a bit of a rollercoaster ride yesterday as weakness in the Asian session was reversed in the US session and the greenback finished almost where it started the day. PBOC’s “verbal intervention” to stabilize the yuan helped cap the dollar’s strength.

PBOC warns don’t follow the herd

In a meeting with local bankers, the PBOC urged them not to adopt a herd mentality when it comes to the local currency and not just sell for the sake of selling. PBOC officials were adamant that they have plenty of tools to stabilize the currency. USD/CNH is now trading at one-week lows as it retraces a part of the near-11% rally since end-March.

Cannot keep the ‘big’ dollar down

Oil prices higher for a third day

Oil prices rose for a second day yesterday as Iran sanctions took hold and concerns about Saudi Arabia’s output continued. The weekly EIA crude inventory data are due later today and are expected to show a drawdown of 3.37 million barrels in the week to July 30, according to the latest survey of analysts, almost completely wiping out the increase of 3.8 million barrels seen last week. Yesterday API data on stockpiles showed a hefty drawdown of six million barrels. WTI is slightly higher so far this morning, trading at 69.558

WTI Daily Chart

Source: Oanda fxTrade

China trade data on tap

China’s trade data for July this morning will be released later this morning with estimates suggesting the trade surplus narrowed to $39.3 billion from $41.5 billion. Markets could be braced for an even lower number given that July is the month when the first tariffs were imposed. Imports are seen rising 10.0% y/y in dollar terms, slower than June’s 11.2% growth, while imports are seen gaining 16.2% y/y. A strong imports number could be beneficial for the Aussie given Australia’s reliance on China as an export market. AUD/USD is currently at 0.7425 with the 55-day moving average sitting above at 0.7450

Source: MarketPulse

Today’s full data calendar can be seen at: https://www.marketpulse.com/economic-events/

Cannot keep the ‘big’ dollar down

The European and Asian sessions were happy to book ‘long’ dollar profits, but North America has decided to renew their acquaintance with the dollar bulls.

A lack of major economic data releases and a stabilizing Chinese yuan overnight provided a temporary reprieve for risk assets and EM currencies.

Another strong JOLTS jobs opening report (+6.66M) has provided the dollar some early support, enabling it to retrace some of its overnight losses.

Sterling’s Wild West

Trading GBP/USD (£1.2943) is proving to be a bit like the Wild West – unpredictable – the pound is again threatening to penetrate yesterday’s record 12-month low now that its failed to benefit from last week’s Bank of England rate rise. Markets are now turning their attention to the Brexit process, which will likely dominate trends in GBP for the remainder of this year.

Loonie failing to fly

USD/CAD (C$1.3020) is another early looser against the dollar, despite crude oil prices remaining better bid now that the U.S has re-introduced sanctions against oil exporter Iran that is expected to tighten global supply.

The loonie has lost some appeal with the Can Ivey July PMI producing a disappointing headline (61.8 vs. 64.2). Dollar bulls want to see C$1.3040 break before adding to their ‘short’ CAD positions again.

Turkish lira takes a bath

The Turkish lira ($5.2492) has recovered some lost ground after plummeting to new record lows yesterday ($5.42), helped by the Central Bank of the Republic of Turkey (CBRT) announcing a cut in the foreign exchange reserve requirement ratio (RRR) for commercial banks, a measure which should boost dollar liquidity. Turkish 10-year bond yields have backed up +25 bps to +20%.

Yesterday’s necessary course of action reaffirms the central banks reluctance to hike rates.

However, the plunge in the currency over the past few weeks is now on a scale, which has, in the past, prompted the CBRT to hike interest rates aggressively. Will the CBRT hike the repo rate this week? They need to, but will they dare defy President Recep Tayyip Erdogan?

With little economic data to hang your hat on, low volumes and market participation, most investors prefer to wait for a significant breakout in any of the G7 pairs before participating with any gusto.

China Introduces 20% Margin on Yuan Futures

China has tightened controls on trading in its yuan to discourage speculators after a decline against the dollar amid a tariff dispute with Washington fueled fears of a damaging outflow of capital from the world’s second-largest economy.

Traders must post a 20 percent deposit starting Monday for contracts to buy or sell yuan on a future date. That raises the cost of betting it will drop and might help to discourage speculative trading.

The tightly controlled yuan has been allowed to decline by about 8 percent against the dollar since early February.



That helps Chinese exporters that face U.S. tariff hikes by lowering their prices in dollar terms. But it also encourages investors to shift money out of China, which would have a broader impact by raising financing costs for other industries.

On Friday, the yuan slipped to a 13-month low of 6.91 to the dollar, close to the highly symbolic level of 7, before strengthening to 6.83 after the margin requirement was announced.

The deepening U.S.-Chinese tariff fight prompted suggestions Beijing might weaken the yuan to help exporters. But analysts say the decline has been driven mostly by China’s slowing economic growth and the diverging direction of U.S. and Chinese interest rates.

via Mainichi

Dollar rally takes a time out

Tuesday August 7: Five things the markets are talking about

Most global equities found traction overnight as earnings season continues, helping support investor sentiment against a backdrop of trade worries and geopolitical concerns.

The trend for a rising U.S dollar is taking a pause, with the dollar edging lower against G10 currency pairs. A lack of major economic data releases and a stabilizing Chinese yuan suggest a reprieve for risk assets and EM currencies today.

This week brings relatively little economic data, but investors will tune in Friday when July’s U.S CPI is reported – a pickup in inflation could temper the dollar’s rally?

Overnight, the Reserve Bank of Australia (RBA) held rates steady for the 21st time, a move that had been unanimously expected. Tomorrow, the Reserve Bank of New Zealand (RBNZ) is expected to maintain its current interest rate of +1.75%.

Elsewhere, crude prices have climbed after Saudi Arabian production cuts added to market concern about tightening supplies. Gold has advanced with industrial metals.

In fixed income, euro bonds are mixed, while U.S 10’s remains range bound.

1. Stocks see the light

In Japan, the Nikkei share average gained overnight after index-heavyweight SoftBank jumped on the back of strong Q1 results, while a rebound in Chinese shares also helped market sentiment. The Nikkei ended up +0.7%, while the broader Topix rallied +0.8%.

Down-under, Aussie stocks were one of the worst performers overnight as the market was held back by a deep pullback in the materials sector. The S&P/ASX 200 fell -0.3% as BHP Billiton retreated -1.4%. In S. Korea, stocks overcame some opening-hour softness to rise solidly, capped by a rally into the close. The Kospi finished up +0.6% as index giant Samsung climbed +2%.

In Hong Kong, shares ended higher as property stocks gained. Both the Hang Seng index and China Enterprises index rallied +1.5%.

In China, stocks rebounded overnight following a heavy four-day selloff, with infrastructure names leading the charge. The Shanghai Composite index jumped +2.7%, while the blue-chip CSI300 index was up +2.92%, its biggest percentage jump in two-years.

In Europe, regional bourses trade higher across the board following on from strong Asian Indices and positive U.S futures.

U.S stocks are set to open higher (+0.3%).

Indices: Stoxx600 +0.6% at 391.0, FTSE +0.7% at 7719, DAX +1.0% at 12725, CAC-40 +0.9% at 5526, IBEX-35 +0.5% at 9797, FTSE MIB +1.0% at 21803, SMI +0.5% at 9193 S&P 500 Futures +0.3%

2. Oil rallies as renewed U.S sanctions on Iran seen tightening supply

Oil prices are better bid now that the U.S has re-introduced sanctions against oil exporter Iran that is expected to tighten global supply.

Spot Brent crude oil futures are at +$74.17 per barrel, up +42c, or +0.6%, from yesterday’s close. U.S West Texas Intermediate (WTI) crude futures are up +30c, or +0.4%, at +$69.31 barrel.

Note: U.S sanctions against Iran, which shipped out +3M bpd of crude in July, officially came into effect at 12:01 am EDT this morning.

The market is anticipating that supply losses could range from +600K to +1.5M bpd.

Ahead of the U.S open, gold prices are better bid, supported by a weaker U.S dollar. Spot gold is up +0.4% at +$1,210.99 an ounce, while U.S gold futures are flat at +$1,217.6 an ounce.

3. Sovereign yields remain range bound

Overnight, RBA left its cash rate target unchanged at +1.50% as expected. Aussie policy officials see CPI a bit lower this year, but higher in 2019-20 period.

Doing the rumour rounds – the Bank of Japan (BoJ) board is said to have considered raising rates before tweaking policy in July – BoJ said to have deliberated tightening in January, but did not do it amid market turbulence. The moves the BoJ took last week are said to be a compromise between board member Amamiya and Governor Kuroda.

Last week, the Fed turned up the rate-hike heat, upgrading both economic activity and household spending from the “solid” to the “strong” camp. Futures prices are setting up another rate hike at the September FOMC meet. However, beyond that, the Fed’s timing will ultimately be decided by incoming data – last week was perhaps less in the ‘strong’ and more in the ‘solid’ camp.

The yield on 10-year Treasuries have rallied less than +1 bps to +2.94%, while the yield on Germany’s 10-year Bund is stable after sliding below +0.40% yesterday. The current yield trades at +0.39%. In the U.K, the 10-year Gilt yield has rallied +1 bps to +1.304%.

4. Turkish lira reprieve

Trade tensions remain the predominate theme, but the USD is seeing some consolidation in its recent strength as Treasury bond yields ease a tad.

The Turkish lira ($5.2406) has recovered some lost ground after plummeting to new record lows yesterday ($5.42), helped by the Central Bank of the Republic of Turkey (CBRT) announcing a cut in the foreign exchange reserve requirement ratio (RRR) for commercial banks, a measure which should boost dollar liquidity. Turkish 10-year bond yields have backed up +25 bps to +20%.

Yesterday’s necessary course of action reaffirms the central banks reluctance to hike rates.

Note: The plunge in the currency over the past few weeks is now on a scale, which has, in the past, prompted the CBRT to hike interest rates aggressively. Will the CBRT hike the repo rate this week?

Sterling is trading atop of its one-year low outright yesterday, falling -0.5% to £1.2935, amid concerns the U.K. might fail to reach an agreement on Britain’s exit from the E.U. Pressure on the pound has come after U.K Trade Secretary Fox estimated there is a +60% chance that “no” Brexit deal would be reached.

EUR/USD (€1.1558) has stayed above the psychological €1.15 handle for the time being and remains confined to its recent trading range.

5. Mounting trade tension starting to bite German data

Data this morning showed that German exports were flat in June compared with May, which may suggest that mounting trade tensions are starting to bite.

Imports, however, rose +1.2% on the month. As a consequence, Germany’s adjusted trade surplus narrowed to +€19.3B in June from +€20.4B in May.

Other data showed that German industrial output declined in June by -0.9% from a month earlier, slightly more than expected, but total production rose +2.5% when taking calendar effects into account.

The fear about a potential trade war will continue to bring uncertainty, and uncertainty will bring a delay in investment decisions.

Forex heatmap

China’s yuan extends gains after PBOC measures on Friday

Costs to go short yuan increase

News late Friday that the PBOC was imposing a reserve requirement of 20% on some trading of foreign-exchange forwards, effective today, saw the Chinese currency rally strongly versus the US dollar, and the yuan continued this trend during today’s Asian session. The introduction of new measures effectively makes it more expensive to short the yuan, which was one of the popular trades to play out the escalating trade tariff war between the US and China.

Also adding to the capping effect on the USD/CNH pair, local financial press have been referring to comments from an unnamed PBOC advisor, though they were made early-July, that the yuan would not drop past 7.00 to the US dollar and that China would probably not want to see it below 6.90. The high for USD/CNH on Friday was 6.9124 ahead of the PBOC’s announcement. The pair is currently trading at 6.8409.

USD/CNH Daily Chart

Source: Oanda fxTrade

US Dollar starts to recoup some of payroll losses

The US dollar weakened on Friday as US nonfarm payrolls rose a disappointing 157,000 in July, below analysts’ estimates of a 190.000 gain. A net upward revision to data from May and June took some of the sting out of weaker headline number and bulls will no doubt focus on the improvement to the unemployment rate to 3.9%. The dollar’s decline was the first in five days but the greenback still managed to rally on the week. 10-year US Treasury yields eased back from just above 3.0% after the data which helped pressure the dollar lower.

US Dollar Takes NFP Hit But Ends Up Higher on the Week

China responds with its own tariff list

China released a list of $60 billion worth of US goods that it intends to hit with tariffs, in retaliation for the US administration’s plan to impose duties on $200 billion in Chinese imports. It has also implied that it is considering placing a 25% import tariff on US natural gas imports. Meanwhile, US President Trump said that the US has the upper hand in the tariff battle and, as a result of the tariffs, should be able to start paying back some of the $21 trillion in debt which has been amassed.

German factory orders on tap

It is a slow start to the week on the data front, with German factory orders and Eurozone investor confidence the only major releases scheduled. Things pick from tomorrow with the RBA rate meeting (though no change expected this year or even next) while China’s July trade data on Wednesday may start to show the impact of trade tariffs. Japan’s Q2 GDP data on Friday is expected to show an improvement from Q1’s contraction while US inflation data rounds off the week.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

US Dollar Takes NFP Hit But Ends Up Higher on the Week

The US dollar fell on Friday after the U.S. non farm payrolls (NFP) came in below expectations with only a gain of 157,000 but otherwise the unemployment rate dropped to 3.9 percent and wage growth remained unchanged at 0.3 percent. The greenback is still higher against most majors on a weekly basis. The past five trading days featured central banks and influential economic indicators, but the guiding factor remains the trade tensions between China and the United States. On Friday China announced its preparing new tariffs on $60 billion US goods as retaliation on the ongoing trade spat. The week that kicks off on August 6 will be more subdued from the economic calendar with the central banks of Australia and New Zealand publishing their officials rates. The UK’s gross domestic product, Canadian jobs data and US inflation will wrap up the week on Friday, August 10.

  • RBA and RBNZ expected to keep rates unchanged
  • UK quarterly GDP forecasted to gain 0.4 percent
  • US inflation advancing at 0.2 percent

Dollar Rises Guided by Geopolitics

The EUR/USD lost 0.61 percent in the last five days. The single currency is trading at 1.1582 after the EUR rose 0.10 percent on Friday but is far from recouping the gains of the USD during the week. The euro rose on a tight rangebound session despite overcoming weak retail sales and was helped by the lower than expected jobs report. The currency pair was mostly guided by geopolitics and the U.S. Federal Reserve meeting on Wednesday. Trade tensions have escalated on the US-China front with the US central bank staying put on rates, but giving an optimistic view on the economy.



The US central bank is expected to continue with its plans to lift interest rates two more times in 2018. The jobs report brought less jobs than expected but still managed to add enough jobs to bring the unemployment rate down to 3.9 percent. There are concerns that the employment numbers will take a hit as trade war decisions trickle down but for now the outlook for American jobs is solid.

Inflation pressures remains low as despite a lower unemployment and high participation rate wages have not caught up to other costs. Labour shortages have not been widespread enough to trigger an above inflation rise in pay.

The positive employment data and the impressive growth of the economy in the second quarter validate the Fed’s decision to raise rates twice so far in 2018 and to continue on the path for two more rate hikes. The CME FedWatch tool shows a 93.6 percent of a chance of a hike in September 26.

The week of August 6 to August 10 will not bring the same economic calendar fireworks compared to the first week of the month. The highlights will be the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) with rate announcements that will likely end up with no change leaving investors to look for words from central bankers and monetary policy language for guidance.

The consumer price index on Friday will shed more light on inflation in America.

BoE Dovish Hike Sinks Pound

The GBP/USD fell 0.79 percent during the week. Cable is trading at 1.3004 wit the pound rising slightly on Friday. The Bank of England (BoE) hiked its benchmark rate on Super Thursday, but it was the cautionary words of BoE Governor Mark Carney that ultimately took the currency lower. The actions of the central bank were hawkish, by delivering the second rate hikes since the crisis, but Brexit looms over the monetary policy decision as hard Brexit scenarios have increased in probability.



The decision of the Bank of England (BoE) was unanimous, but given the fragile state of Prime Minister May’s leadership as she heads into the final 8 months of Brexit negotiations, it could end up being the only pro-active decision by the central bank in 2018 as it heads into reactive territory.

Loonie Higher on Strong Data and NAFTA Hope

The USD/CAD lost 0.58 percent during the week. The currency pair is trading at 1.2983 after strong Canadian trade data added more arguments for a Bank of Canada (BoC) rate hike. Canada’s deficit shrunk to $626 million in June. The monthly GDP numbers released on Tuesday by beating estimates with a 0.5 percent gain.


Canadian dollar weekly graph July 30, 2018

The Bank of Canada (BoC) lifted interest rates by 25 basis points on July 11 and a strong GDP report and a narrower trade deficit the probability of a follow up in 2018 has risen. Bank of Nova Scotia is forecasting 2 more rate hikes despite the uncertain outcome on NAFTA. The BoC will try to keep the gap between the Fed funds rate and the Canadian rate as much as the economy will allow. The U.S. Federal Reserve is expected to hike in September and again in December to deliver the promised four interest rate hikes in their path to normalization.

Mexican Peso Rose as US Jobs Missed Expectations

The USD/MXN depreciated on a weekly basis and is trading at 18.5574 on Friday afternoon. The currency pair had a volatile week trading in a tight range. The highest point came as trade fears triggered a flight to safety in which investors bought dollars. The talks on Thursday and Friday between US and Mexican negotiators are keeping NAFTA hope alive and with he soft employment numbers in the US the MXN appreciated.



NAFTA negotiations have advanced in recent weeks as the newly elected Mexican president has been optimistic a quick deal can be reached. Mexican Trade teams are in Washington to talk with the US Trade representative, but the US did not extend an invitation to Canada to join the meetings.

The US team is sticking to the sunset cause and the auto content but there is more willingness to negotiate in bilateral terms, although Mexico has made it clear that it won’t negotiate without Canada being present.

Market events to watch this week:

Tuesday, August 7
12:30am AUD RBA Rate Statement
11:00pm NZD Inflation Expectations q/q
11:05pm AUD RBA Gov Lowe Speaks
Wednesday, August 8
10:30am USD Crude Oil Inventories
5:00pm NZD Official Cash Rate
6:00pm NZD RBNZ Press Conference
Thursday, August 9
8:30am USD PPI m/m
9:30pm AUD RBA Monetary Policy Statement
Friday, August 10
4:30am GBP GDP m/m
4:30am GBP Manufacturing Production m/m
4:30am BP Prelim GDP q/q
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD CPI m/m
8:30am USD Core CPI m/m

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