Dollar firmer amid trade talk trouble

Dollar rises as China cancels trade talks

The US dollar was marginally higher on a holiday-thinned Asia Monday morning, reacting to weekend news that China had cancelled plans to visit Washington this week for trade talks. Remember the next set of US tariffs on $200 billion of China goods has just kicked in at 12am Washington time with $110 billion worth of US goods being hit by China tariffs at the same time. There is speculation that nothing further will happen with trade negotiations before the US mid-term elections in November.

 

 

Of the equity market that were open (China, Japan, South Korea and Taiwan were all closed), Hong Kong stocks reacted negatively to developments, dropping 1.59% while Australia gained 0.2%. The SPX500USD CFD declined 0.22% to 2,921.1. On Friday it hit a record high. The Aussie currency reacted more, falling 0.46% versus the dollar to 0.7255 as the US dollar, measured against a basket of six currencies, rose 0.11%.

 

UK Sunday press awash with rumors

The UK’s Sunday Times reported that aides to PM May had started contingency planning for a snap November election in order to rally public support for an updated and improved Brexit plan. The pound suffered heavily on Friday, falling the most in one day since June 2017, after May was heavily criticized at the EU summit in Salzburg and said that talks were at an impasse. The rally from the August 15 low stalled near the 50% retracement level of the drop from April 17.

 

GBP/USD Daily Chart

Source: Oanda fxTrade

 

 

Oil prices advance as OPEC ignores Trump’s demands

US President Trump called on OPEC to reduce oil prices which provoked the response from the group that it would boost output only if customers asked for it. This pushed oil prices higher with West Texas Intermediate pushing further ahead from the $70 mark, rising as high as $72.40 per barrel, the highest in 2-1/2 months. Brent continues to straddle the key $80 per barrel level, currently at $80.306.

 

WTI Daily Chart

Source: Oanda fxTrade

 

Another improvement in German IFO surveys may help the Euro

It’s a slow start to this week’s busy data schedule with German IFO surveys and the UK’s CBI orders survey the only items to set the pulse racing in Europe. The IFO survey last month saw the expectations index bouncing higher and another improvement in sentiment in September could help EUR/USD stave off some of the dollar’s strength today. The current assessment index has been rising for the past two months and was at 106.4 last month. However, economists expect the business climate to deteriorate to 103.0 from 103.8, the latest poll shows.

The North American session features August’s Chicago Fed activity survey, the Dallas Fed business index for September and Canada’s wholesale sales for July.

 

The full MarketPulse data calendar can be viewed here: https://www.marketpulse.com/economic-events/

 

OANDA Trading Podcast : BFM 89.9 Kuala Lumpur

Source: MarketPulse

OANDA Trading Asia markets update

Asia markets update

The weekend headlines have not been a blessing for ‘risk sentiment” and while the optimist in me is siding on this too shall pass. But with markets closed in Japan, China and South Korea as a large part of Asia celebrates the Mid-Autumn festival, it impossible to gauge sentiment in these drastically diminished liquidity conditions.

While Hong Kong markets are trading poorly but it difficult to separate the wheat from the chaff after last Friday the Pboc announced they would issue T-bills via the HKMA in Hong Kong money markets, which implies driving local interest rates higher. But of course, shelving the US-China trade talks is not rated highly for local risk sentiment either, a bit of a double whammy of sorts today for Hong Kong.

However, it was unlikely that either the US or China was going to pull a rabbit out of the hat before the US midterm election anyway. However, traders remain in wait and see mode while treading rather gingerly in today Asia session. But indeed, this discussion will likely continue throughout the 24-hour trading cycle.

But overall, no one is taking anything for granted and certainly won’t underestimate the possibility of the US announcing reviews of further China tariffs at some point in time given the Trump administration ‘modus operandi’ of applying non-stop pressure.

Currencies

More risk-sensitive currencies, especially EM are feeling the pinch from weekend headlines bluster, but liquidity is extremely thin and likely contributing to some outsized moves. For reference, G-10 volumes are around 50 % lower as per EBS data. But what action we are seeing is small AUD selling.

Indian Rupee

Not too surprising the INR back under pressure from rising crude prices and domestic credit wobbles after one of the large Non-Banking Financial Companies missed an interest payment last Friday

Oil Markets

Oil investors are trading the weekend news very favourably, Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting while decidedly ignoring U.S. President Trump’s call to increase supplies and ease price pressures.
Not a great deal of oil market noise today, but traders are quickly pivoting to US inventories data with some small discussion around reports that Cushing Oklahoma delivery point may have declined further in the week ended September 21. But ultimately all these noises pale in the lead up to November 4 Iran sanctions, which continue to underpin sentiment

OANDA Trading Podcast: BFM 89.9 Kuala Lumpur

Numerous crosscurrents in play

Numerous crosscurrents in play

US equities 

On Friday the Dow and S&P opened and closed again at fresh highs on massive volumes due to options expirations, and while headlines over the weekend suggested that trade talks between both US and China will be shelved until after the US midterm elections, markets will not view this in too much of a negative light. It’s not so unexpected, and frankly, the US administration would be just as happy to keep trade wars out of the headlines ahead of the politically charge midterms where the Whitehouse will need to expend much political energy righting their political ship. But more importantly, the markets were viewing the November G-20 summit as a critical focal point where it’s expected both Ji and Trump will take to the sidelines with the intentions agreeing on a roadmap to settle this trade dispute. Not to mention, backchannels will most likely be open. But make no mistake, this will be a bumpy ride and don’t underestimate the possibility of the US announcing reviews of further China tariffs at some point in time given the Trump administration “modus operandi” of applying non-stop pressure.

Regardless, the astounding closing price action in equities last week, particularly the Shanghai composite and the US Indices suggest the markets are incredibly confident on a US-China trade deal by year-end, more Chinese stimulus to come, and hopefully a stable Yuan.

NAFTA 
On the no less political contentious NAFTA 2 trade talks. Canada is expected to join a NAFTA 2.0 agreement. But the Quebec election falls on Oct 1, and with the Provincial Liberals pulling ahead in the polls every so slightly, it’s debatable how much of a rush the Federal Liberals will be to ink a deal before month end. Especially given the political fallout from any concessions around the dairy industry, as the bulk of Canada’s Milk industry is based in Quebec.

Focus 

Traders will continue to monitor Chinese equities, DXY and copper.

Copper is fantastic leading indicators of risk and the economic cycle. Shanghai copper rose smartly on Friday bolstered by China’s fiscal efforts to bump up demand.

US Yields 

The US 10 yields finished the week above 3.05 % and could be setting the stage for a push higher. Rate differentials are still very much in favour of the USD story. But unlike when US yields rocketed higher in May, the UK and Canadian yields are breaking higher, while Japan is staying the top end of YCCC But more significantly Bunds are trading in the 50 bp region so there’s a bit more yield competition for the dollar to contend.

The US dollar 

Speaking of which, the USD could trade defensively ahead of this weeks FOMC as USD Bulls erring on the side of caution. With 2 US rates hikes priced into the balance 2018 and in the absence of inflation, it’s almost impossible for the Feds to bump up the 2019 curve. So, the markets will end up focusing on shifts in the longball forecast into 2020 which is not the best or brightest of signals for currency traders who tend to view markets in much nearer time horizons. Even if the Feds prod 2020 curve higher, its unclear how much of a USD fillip that shift could deliver given that Chair Jay Powell has contiued to de-emphasise 2020 dots. Unless we get an unexpected shift in the Feds terminal policy range of 2.75-3.00%, not sure the dollar ( X -JPY) goes anywhere but trades within well-worn ranges.

Oil Markets 

Last week oil prices were trading buoyantly on reports Saudis are more than happy with a Brent price above $80 or that OPEC, more generally, is not considering raising output. That was until President Trump castigated OPEC ahead of this weekends Algiers meeting.

However, Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting while decidedly ignoring U.S. President Trump’s call to increase supplies and easing price pressures. Not wholly unexpected mind you as the markets have been leaning toward December 3 OPEC summit for more formal decisions

WTI is trading the weekend news very favourably, up over 1 % at the NYMEX open and additionally spirited on by reports  of inventories at the Cushing Oklahoma delivery point may have declined further in the week ended September 21.

But bullish sentiment could be tempered somewhat by several reports suggest ing OPEC producers generally agree that oil prices above Brent $80 a barrel would be too high. Which plays into the long-held market axiom that OPEC is looking to stabilise prices within the $70-80 $ sweet spot

Gold Markets 

With risk sentiment soaring there has been very little demand for Gold and when you factor in the fact that Gold traditionally trades poorly ahead of anticipated Fed hike, the USD will have up ground to entice buyer back to the market.

G-10

Japanese Yen

The Yen continues to consolidate but with the BoJ continuing to float the idea of shiting policy for no other reason than to support the beleaguered banking sector after years of 0 % interest rates. These trial balloons could contiued to weight on the top side despite USDJPY getting massive support from the favourable interest rate differentials.

The Euro 

I still think Italy risk is way underpriced and the Eurozone economic recovery is so uneven that the EURUSD could move lower given the US robust US economic story.

EM Asia

Hard to envision anything other the current account ( ca)deficit currencies remain vulnerable while ca surplus countries will contiued fare well.

The Chinese Yuan

China will move towards current account deficit and with interest rates likely to move lower to stimulate the economy the RMB will either trade weaker or remain stable at the at the CNY weakest levels of the current range.

The Malaysian Ringgit

The song remains the same. Positive updraft from global risk sentiment coupled with rising oil prices. But offset by increasing global yields, especially those in the US which lessens the appeal for local bonds.

The Rupee and Rupiah 

As for the regional whipping boys IDR and INR, this a very complicated landscape and surging oil prices will continue to be an outsized problem for both currencies, And despite pledges to fix deficits, there has been no proof in that pudding. Instead, BI and RBI are coming up with creative yet very patchy methods of different interventions like the mandatory conversion for export proceeds in Indonesia, for example, or taking oil demand off the market in India.

Which brings us full circle, to this weeks FOMC, where it’s expected both BI and RBI will raise interest rates to match next week Fed hike. So, their ongoing currency struggles will continue to make headlines. However, without addressing the real underlying problems around deficits, hiking interest rates to prop up currency is like putting a band-aid on a broken leg as speculators will continue to target deficit currencies at every opportunity.

Friday Rupee sell-off was directly related to the impact of the RBI raising interest rates which have reportedly caused a massive corporate default for a shadow lender in the housing sector and triggered a significant sell-off in local equity markets.

Ultimately the consumer pays the piper in any rate hike scenario.

EM Asia: Next weeks discussions

By Stephen Innes Head of Trading Asia @steveinnes123

EM Asia sentiment continues to improve; regional equities were trading very well on a  weaker dollar. ASEAN markets do enjoy a capital inflows bump when the US dollar is broadly weaker.

Bloomberg China Calls Off Trade Talks, Won’t Go to Washington Until After Mid-Terms

China

In addition to the significant headlines risk around the FOMC and trade war, the local discussion will continue centring around Premier Li Keqiang ’s comments on import tax cuts, and that policymakers have no intention to weaponise the Yuan in a trade war.

By cause in effect, his comments appear to have improved investor sentiment, as the Shanghai Composite ended up having its best week since 2016, although market chatter is suggesting Friday afternoon extension was nudged on by intervention to reach that high-water mark and boost investor conviction ahead of the long weekend. Nonetheless, we will leave that discussion for another day on how China market intervention, if right in this instance, does tend to hurt the credibility of their intentions.

But let’s not lose sight of the fact that in the absence of a trade deal or a clear signal that one is about to happen post-November G-20, the policy hawks in the Trump administration will be hell-bent on imposing 25 % tariff on 200 billion if not doubling down to 400 billion.

End of November remains the key, and if no resolution by then, the market will yet again price in a meltdown in Chinese equities and a  strong probability the PBOC would allow the renminbi to weaken substantially. Knowing this, investors may tap the brakes after last weeks astonishing equity market recovery, and FX traders will continue to position long USDCNY, knowing full well where the significant tail risk lies.

INR and IDR 

As for the regional whipping boys IDR and INR, this a very complicated landscape and surging oil prices will continue to be an outsized problem for both currencies, And despite pledges to fix deficits, there has been no proof in that pudding. Instead, BI and RBI are coming up with creative yet very patchy methods of unorthodox interventions like the mandatory conversion for export proceeds in Indonesia, for example, or taking oil demand off the market in India.

Which brings us full circle, to this weeks FOMC where it’s widely expected both BI and RBI will raise interest rates to match next week Fed hike. So, their ongoing currency struggles will continue to make headlines. However, without addressing the real underlying problems around deficits, hiking interest rates to prop up currency is like putting a band-aid on a broken leg as speculators will continue to target deficit currencies at every opportunity.

Friday Rupee sell-off was directly related to the impact of the RBI raising interest rates which have reportedly caused a massive corporate default for a shadow lender in the housing sector and triggered a significant sell-off in local equity markets.

Ultimately the consumer pays the piper in any rate hike scenario.

Please join me on Live on Monday discussing cross-asset markets 

BFM Radio Kuala Lumpur  7:35 AM SGT  on the Market Watch

938Now 9:00 AM SGT for an extended view  on global markets

France 24 TV at 12:15 SGT for the European Open coverage

Jazz FM London 1:00 PM SGT discussing the Asia markets today

Bring on the FOMC !

FOMC 

The FOMC meeting next week has a hike fully priced in so the focus will be on the dot plots and the follow-up presser which has dollar bulls questioning their near-term positions.

The meeting will be overly scrutinised to see if there are any changes in the projections, with new Vice-chair Clarida voting for the first time. Also, Chair Powell will likely be quizzed on Fed Governor Lael Brainard view that US interest will probably need to be made more restrictive in the sense that at some point in the future if the unemployment rate remains low, policy rates should move above neutral and into the restrictive territory.

Dovish tail risk

And herein lies the dovish tail risk which has  USD Bulls erring on the side of caution. With 2 US rates hikes priced into  the rest of 2018 and in the absence of inflation, it’s almost impossible for the  Feds to bump up the 2019 curve. So, the markets will end up focusing on shifts in the longball forecast into 2020 which is not the best or brightest of signals for currency traders who tend to view markets in much nearer time horizons. Even if the Feds prod 2020 curve higher, its unclear how much of a USD fillip that shift could deliver given that Chair Jay Powell has contiued to de-emphasise 2020 dots. Unless we get an unexpected shift in the Feds terminal policy range of 2.75-3.00%, not sure the dollar ( X -JPY) goes anywhere but trades within well-worn ranges.

What else in G-10?

AS for the rest of G10, there will be no shift from RBNZ, but in the wake of the surprisingly strong data of late especially the monster GDP beat, we could see a subtle less dovish change in guidance.

It’s not a busy calendar next week per say but dotted by US PCE and EUR sentiment surveys. Canada delivers a GDP report, but NAFTA talks will continue to overshadow data as yet another NAFTA month-end deadline looms.

Brexit Blues 

It’s back to the Brexit drawing board after EU leaders “Chequers mated “and utterly humiliated May at the Salzburg meeting which sent the Pound tumbling below the 1.3100 before finding some composure. Of course, most believe a deal in some form or another will eventually happen. But in the nub of all this Brexit bluster, UK data has been surging with both CPI and Retail Sales beating expectations, but indeed  Brexit uncertainty has overshadowed.  Next week’s UK GDP data could be another strong point, however, with little to no breakthrough on Brexit likely to happen any time soon, The Bank of England will remain unwavering until clarity on Brexit it offered up so the market will likely look past next weeks UK data.

Great insights from our Senior Markets Analyst in London, Craig Erlam  

Sterling Down on May Brexit Warnings

OANDA Market Insights podcast (episode 32)

Craig reviews the week’s business and market news with Jazz FM Business Breakfast presenter Jonny Hart.

This week’s big stories: Sterling wobbles on Brexit fears, US/China tariffs tit for tat, Inflation hike against expectations.

China 

China PMI which will be closely monitored. Also, we should expect more trade headlines to come into play as both US and China tease with the idea of resurrecting trade talks.

USD Price Action 

Gauging this weeks price action in the wake of Trump tariff announcement, the markets overwhelming viewed the 10 % on 200 billion tariff levy and the measured responses from China as a smoke signal for further negotiation shortly. So the unwind of global USD hedges ensued as the market just found themselves far too long USD at not such grand levels. But the robust fundamental storyline in the US economy coupled with weak PMI data in Eurozone this week, I don’t think we’ve heard the last from the dollar bulls just yet.

Currencies in focus next week

EUR: a huge disappointment to the bulls with a close below 1.1750. While Fed forward guidance will drive the bus next week, the negative  EU PMI lean could hang like an anvil around the EURO neck.

CNH: It has to be on everyone’s radar especially after this weeks exodus of long USD hedge position on a combination of Trade war de-escalation, comments that mainland will not weaponise the Yuan as a tool in the trade war and offshore funding squeeze on the back Pboc to sell bills in Hong Kong. Despite the correction lower in USDCNH, given that China’s current account surplus is expected to shrink as a result of US tariffs and if the Feds signal clear dot plot sailing or even shift slight higher, CNH could sell off again.

Oil markets

Traders will pay close attention to Sunday headlines from Algiers as OPEC, and cooperating non-OPEC producers will meet on Sunday in Algeria

Likely seeking to appease President Trump, unnamed members of OPEC suggested they would discuss adding 500 K barrels per day, and while it gave cause to book some profit and reduce risk, its highly unlikely anything dealing with supplies will happen before the December 3 OPEC summit.

Despite wire reports suggestions otherwise, most of the oil traders in my circle, and despite the usual OPEC headline noise, think the meeting will be little more than the steering committee review of production and market data.

Please join me on Live on Monday discussing cross-asset markets 

BFM Radio Kuala Lumpur  7:35 AM SGT  on the Market Watch

938Now 9:00 AM SGT for an extended view  on global markets

France 24 TV at 12:15 SGT for the European Open coverage

Jazz FM London 1:00 PM SGT discussing the Asia markets today

 

 

 

 

Canadian Inflation Lifts Probabilities of an October Rate Hike

The USD/CAD fell 0.92 percent in the last five days. The currency pair is trading at 1.2921 after various phases of NAFTA jitters have helped and pressured the loonie. The Canadian currency gained on a weekly basis against a softening greenback.

US-China trade rhetoric hast lost some traction, and as JP Morgan CEO Jamie Dimon put it, it’s more like a skirmish than a war.


Canadian dollar weekly graph September 17, 2018

NAFTA optimism remains high, but officials from both sides have begun to trade sound bites as frustrations mount.

US White House Chief Economic Advisor Kevin Hasset said in a TV interview that the US could forge ahead with the Mexico only trade deal. The US has been trying to get Canada to join the quick agreement made with Mexico, but so far the negotiations have not been as smooth.

Canadian Foreign Minister wrapped up her Washington visit on Thursday with the Quebec elections on October 1 an important day if dairy concessions are given as part of the NAFTA renegotiation.

Canadian monthly GDP data will be released on Friday September 28, with a forecast of 0.1 percent. The stronger pace earlier in the year and with inflation above target will pressure the Bank of Canada (BoC) to lift rates in October. Probabilities of a 25 basis points hike are at 88.74 percent.

US Dollar Recovers Ground Ahead of Fed Meeting

The US dollar bounced back on Friday, but could not offset the losses suffered during the week. The greenback was lower against most major pairs at the end of five days. Traders adjusted their positions before the weekend giving some breathing room to the USD.

The U.S. Federal Reserve will host its two-day meeting on Tuesday and Wednesday. The Federal Open Market Committee (FOMC) statement will be published at 2:00 pm EDT followed by a press conference by Fed Chair Jerome Powell at 2:30 pm EDT.

A rate lift by the US central bank is highly anticipated and has been priced in to the dollar putting more focus on the words of the Fed chief.

Euro Appreciates as US Trade War Fears Soften

The EUR/USD surged 1.05 percent this week. The single currency is trading at 1.1743 after a late recovery attempt by the USD on Friday.



The Trump administration unveiled the second round of tariffs against Chinese goods on Monday but as more details came out an all out trade war can still be averted.

Despite the rhetoric market participants are optimistic about a resolution that will not have a negative impact on global growth.

German data and EU inflation will be released this week. German confidence has improved of late and forecasts show that trend will continue but European inflation early results are not expected to have gained traction. The EUR has recovered from political uncertainty earlier in the year, but investors will look at fundamentals for guidance.

Canadian Inflation Lifts Probabilities of an October Rate Hike

The USD/CAD fell 0.92 percent in the last five days. The currency pair is trading at 1.2921 after various phases of NAFTA jitters have helped and pressured the loonie. The Canadian currency gained on a weekly basis against a softening greenback.

US-China trade rhetoric hast lost some traction, and as JP Morgan CEO Jamie Dimon put it, it’s more like a skirmish than a war.


Canadian dollar weekly graph September 17, 2018

NAFTA optimism remains high, but officials from both sides have begun to trade sound bites as frustrations mount.

US White House Chief Economic Advisor Kevin Hasset said in a TV interview that the US could forge ahead with the Mexico only trade deal. The US has been trying to get Canada to join the quick agreement made with Mexico, but so far the negotiations have not been as smooth.

Canadian Foreign Minister wrapped up her Washington visit on Thursday with the Quebec elections on October 1 an important day if dairy concessions are given as part of the NAFTA renegotiation.

Canadian monthly GDP data will be released on Friday September 28, with a forecast of 0.1 percent. The stronger pace earlier in the year and with inflation above target will pressure the Bank of Canada (BoC) to lift rates in October. Probabilities of a 25 basis points hike are at 88.74 percent.

Oil Ends Week Higher with OPEC Meeting to Provide Guidance

Oil prices rose ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting in Algiers in a week that included supply concerns and pressure from US President Trump to keep prices low.


West Texas Intermediate graph

The production cut agreement by the OPEC and other major producers has been the most important factor in the stabilization of crude prices since the 2014 drop.

Supply disruptions have kept prices in current ranges even as the OPEC and partners such as Russia will be discussing ramping up production.

The biggest disruption to supply this year has come from the reapplication of US sanctions against Iranian exports. Global producers that are part of the supply curb have telegraphed their intentions but weather and geopolitical factors have been offset with global growth and energy demand forecast downgrades.

Weekly US inventories threw another drawdown data point on Wednesday and have kept the black stuff bid. President Trump has used twitter as a macro policy tool and this time his aim fell on the OPEC.

The organization has limited options and will look to Saudi Arabia for leadership as some members have pressured internally to increase production for their own national interests.

This time the US is mixing political and economic factors to force an increase in supply, even though the White House is the one who triggered the latest disruption.

Yellow Metal Loses Shine on Friday Looks Ahead to Fed Rate Hike

Gold was lower on Friday by 0.65 percent, but gains earlier in the week still managed to put it in the black with a 0.19 percent gain.

The safe haven appeal of the yellow metal was lower as US stock markets continued their rally stoked by improving economic data in America.



The Fed’s imminent rate hike is keeping gold close to the $1,200 price level and the Swiss franc is now the de facto refuge for investors.

With a 25 basis points fully priced in from the Fed metal investors will be focusing on the economic projections and any changes in the wording of the statement looking for clues on the rate hike path of the central bank.

Market events to watch this week:

Monday, September 24
4:00am EUR German Ifo Business Climate
Tuesday, September 25
10:00am USD CB Consumer Confidence
9:00pm NZD ANZ Business Confidence
Wednesday, September 26
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Economic Projections
2:00pm USD FOMC Statement
2:00pmUSD Federal Funds Rate
2:30pm USD FOMC Press Conference
5:00pm NZD Official Cash Rate
6:00pm NZD RBNZ Press Conference
Thursday, September 27
8:30am USD Core Durable Goods Orders m/m
8:30amUSD Final GDP q/q
Friday, September 28
4:30am GBP Current Account
8:30am CAD GDP m/m

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

Sterling Down on May Brexit Warnings

May resorts to rehashing old threats after failed Salzburg meeting

Theresa May took to the podium on Friday in an attempt to hit back at the EU after she was humiliated in Salzburg in what was meant to be a positive meeting ahead of the Tory Party Conference.

While May will be desperate for the takeaway from the speech to be that the UK is serious in its no deal threats and the EU should take their proposal seriously and resume dialogue based on the government’s Chequers plan or risk such an outcome, the speech itself was nothing but a stern rehash of what has been said in the past. As ever, these talks are showing themselves to be a frustrating and soul destroying game of chicken among a group of officials that agree that no deal is a bad outcome but are determined to drag them out in the hope of slightly better terms.

The pound came under pressure in the lead up to May’s speech and that continued during and in the aftermath, with traders potentially seeing this as a sign that no deal is a real and increasingly likely outcome. That may be exactly the message May wanted to send to the media, her party – particularly the Brexiteers – and the EU but I do not believe it changes anything. A fudged 11th hour deal that kicks the can down the road on the toughest decisions still remains the most likely outcome and I do not believe the appetite exists on either side for no deal that makes it as likely as we’re being led to believe.

GBPUSD Daily Chart

EURGBP Daily Chart

GBPJPY Daily Chart

GBPCAD Daily Chart

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD – Surging Canadian dollar at 14-week high, CPI and retail sales next

The Canadian dollar is trading sideways in the Friday session, after posting strong gains in the Thursday session. Currently, USD/CAD is trading at 1.2924, up 0.13% on the day. On the release front, Canada releases key consumer data. CPI is expected to post a rare decline, with an estimate of -0.1%. Retail Sales is forecast to rebound and record a gain of 0.6%. There are no major releases out of the U.S.

The U.S dollar is broadly lower this week, and the Canadian dollar has jumped on the bandwagon, posting gains of close to 1%. On Thursday the pair dropped to 1.2884, its lowest level since June 11. However, the Canadian currency’s gains have been pared due to pressure on oil prices. If this continues, the Canadian dollar could surrender some of its recent gains.

The US-China trade war is heating up, with the two economic giants exchanging tariffs this week. On Monday, U.S President Trump announced 10% tariffs on some $200 billion worth of Chinese goods. China quickly responded, slapping 10% tariffs on $60 billion in US exports. These tit-for-tit tariffs have become a familiar script, only this time investors haven’t panicked and snapped up U.S dollars. Investors are somewhat relieved that the tariffs are just 10%, and China is taking measures to reduce the effect of the tariffs on its economy, including increasing stimulus and infrastructure spending. Global growth remains strong, despite the tariff spat. However, China has also threatened to cancel upcoming trade talks with the U.S, in protest of the recent U.S tariff.

Yen at two-month low versus dollar on Wall Street surge

Central Banks up the ante to normalize interest rates

 

USD/CAD Fundamentals

Friday (September 21)

  • 8:30 Canadian CPI. Estimate -0.1%
  • 8:30 Canadian Retail Sales. Estimate 0.6%
  • 9:45 US Flash Manufacturing PMI. Estimate 55.1
  • 9:45 US Flash Services PMI. Estimate 54.9

*All release times are DST

*Key events are in bold

 

USD/CAD for Friday, September 21, 2018

USD/CAD, September 21 at 7:50 DST

Open: 1.2905 High: 1.2919 Low: 1.2898 Close: 1.2924

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2515 1.2666 1.2830 1.2970 1.3067 1.3160

USD/CAD showed little movement in the Asian session and posted small gains in European trade

  • 1.2830 is providing support
  • 1.2970 is the next resistance line
  • Current range: 1.2830 to 1.2970

Further levels in both directions:

  • Below: 1.2830, 1.2666 and 1.2515
  • Above: 1.2970, 1.3067, 1.3160 and 1.3292

DAX rally continues as investors ignore tariff war

The DAX index has posted strong gains in the Friday session. Currently, the index is at 12,393, up 0.54% on the day. On the release front, German and eurozone manufacturing PMIs disappointed, missing their estimates.

It’s been a good week for the DAX, which has jumped 2.9 percent. Earlier on Friday, the DAX touched 12,458 points, a high for September. Clearly, risk appetite remains strong, despite the U.S and China exchanging another round of tariffs this week. On Monday, U.S President Trump announced 10% tariffs on some $200 billion worth of Chinese goods. China quickly responded, slapping 10% tariffs on $60 billion in US exports. These tit-for-tit tariffs have become a familiar script, only this time investors haven’t panicked and snapped up U.S dollars. Investors are somewhat relieved that the tariffs are just 10%, and China is taking measures to reduce the effect of the tariffs on its economy, including increasing stimulus and infrastructure spending. Global growth remains strong, despite the tariff spat. Although China has threatened to cancel upcoming trade talks with the U.S in protest of the recent tariff decision, investors are in an optimistic mood.

German and eurozone manufacturing PMIs were soft in September. The German indicator dropped sharply, from 56.1 to 53.7, missing the estimate of 55.7 points. This marked the weakest reading since August 2016. It was a similar story from eurozone manufacturing PMI, which fell from 54.6 to 53.3, the lowest level since October 2016. This marked the ninth straight month that the indicator has weakened – in December 2016, the indicator stood at 60.6 points. There was better news from services PMIs. German Flash Final Services PMI rose to 56.5, above the estimate of 55.1 points. The eurozone release improved to 54.7, above the estimate of 54.5 points.

Yen at two-month low versus dollar on Wall Street surge

Central Banks up the ante to normalize interest rates

Economic Calendar

  • 3:30 German Flash Manufacturing PMI. Estimate 55.7. Actual 53.7
  • 3:30 German Flash Services PMI. Estimate 55.1. Actual 56.5
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.4. Actual 53.3
  • 4:00 Eurozone Flash Services PMI. Estimate 54.5. Actual 54.7

*All release times are DST

*Key events are in bold

 

DAX, Friday, September 21 at 7:10 DST

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