Week Ahead – Dollar Slows Down After US Jobs Miss

The US dollar was mixed Friday. The greenback advanced against the commodity currencies (CAD, AUD AND NZD) edging higher against the CHF, but was lower agains the JPY and the EUR. The GBP deserves a special mention as positive Brexit rumours pushed it 0.61 percent higher against the USD. The American currency lost momentum as the U.S. non farm payrolls (NFP) headline jobs number disappointed with a 130,000 added positions, instead of the forecasted 188,000.

The USD was boosted by solid fundamentals that keep pricing in a fourth rate hike in 2018. The Columbus Day holiday in the United States will shorten the trading week. US inflation data points will be the highlights with US PPI on Wednesday October 10, and US CPI on Thursday October 11.

  • UK GDP to slowdown at 0.1 percent
  • US PPI forecasted to bounce back to 0.2%
  • US inflation steady at 0.2 percent

Dollar to Look for Inflationary Clues

The EUR/USD is flat on Friday ahead of the long weekend in the United States. The single currency is trading at 1.1514 awaiting a long weekend and a short trading week. The US currency was supported by Fed member speeches that continue to support a fourth rate hike in 2018.



The Fed raised rates on September 26 by a quarter of a percentage point and barring a sharp decline in economic indicators will do so again in December. The path for the US dollar for the end of the year will be unobstructed, but as 2018 begins to wrap up the strong dollar narrative is raising doubts.

In Europe Italian budget concerns once again rose despite the government conceding to lower budget deficits in 2020 and 2021. The budget concessions also came with lower growth forecasts that pressured the stock market and sent Italian yields higher. The EU is unlikely to accept the budget without further changes, but the political climate could further complicate things.

The EU could be fighting in two fronts. Brexit negotiations are ongoing, and despite some positive signs, are nowhere near an agreement. Opening another front by shooting down the Italian budget could be a replay of the Greek drama in 2010 but at a much larger scale.

Loonie Falls Despite US Jobs Report Miss

The Canadian dollar fell against the US dollar on Friday despite a rebound in Canadian employment numbers and a miss in their American counterparts.

The loonie did advance against the greenback when the NFP report and the Canadian employment numbers were announced but as traders looked ahead to the long weekend they reduced their short US dollar exposures.


Canadian dollar weekly graph October 1, 2018

Canada added 63,300 positions in September driven by part time employment. The gain offset last month’s losses of 54,100 jobs that were also part time positions. The Bank of Canada (BoC) will have another solid datapoint to validate its upcoming monetary policy meeting that is being priced in at 85 percent probability of a rate hike.

The Canadian dollar is on track to end 0.29 percent lower versus the US dollar. Despite the headline jobs miss on the NFP report, the revisions and more importantly the inflation components still support a Fed rate hike in December. The CME’s FedWatch tool shows a 81.7 percent probability, down slightly from 83.3 percent yesterday.

Gold Higher on Dollar Stumble

Gold rose on Friday taking advantage of a miss on the monthly U.S. non farm payrolls (NFP) report. The US economy added 130,000 jobs with market forecasts near 200,000 positions added in September.

The yellow metal rose as the market digested the jobs report miss and put the US dollar under pressure.

Gold will hold on to weekly gains but as a long weekend approaches due to the Columbus Day holiday investors will trim their dollar short exposure limiting the upside for commodities.



The weakest US jobs report this year took a toll on the US dollar. The headline miss was only part of the story, wages grew as much as expected and while the lower numbers this month do not raise questions on a December rate lift by the Fed it does affect the intensity of the market focus on next week’s inflation indicators.

Oil Higher until OPEC-Russia Confirm Production Increase

West Texas Intermediate is rising 0.55 percent on Friday, with Brent making a smaller upwards move at 0.05 percent. Question marks about how and when will energy producers increase production to cover the supply fallout from the official start of US sanctions against Iran.

The sanctions start on November 4, but already Iranian exports have fallen given how the US communicated that it would not tolerate any cooperation.

The Trump administration has called out the OPEC for not doing enough to keep crude prices low, but ironically it’s the sanctions imposed by the administration that have put oil prices higher.



On a weekly basis WTI and Brent have advanced ore than 2 percent as US Secretary Rick Perry has taken off the table the option to use the emergency oil reserves to bring prices down.

Reports circulated that Russia and Saudi Arabia are ready to increase oil production, but if they have agreed they said nothing after the OPEC met with major producers on September 23 in Algiers.

Oil prices will continue to fluctuate upwards until there are confirmations that energy producers are ready to offset the lost supply from Iran.

The weekly crude inventories report will be published on Thursday at 11:00 am EDT due to the Columbus Day holiday in the states.

Market events to watch this week:

Wednesday, October 10
4:30am GBP GDP m/m
8:30am USD PPI m/m
Thursday, October 11
7:30am EUR ECB Monetary Policy Meeting Accounts
8:30am USD CPI m/m
11:00am USD Crude Oil Inventories
Friday, October 12
10:00am USD Prelim UoM Consumer Sentiment

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

Strong Dollar Awaits Jobs Report to Validate Further Fed Hikes

The US dollar is mixed against major pairs on Friday. The dollar gained against the JPY, EUR, GBP and CHF but depreciated against the commodity pairs (CAD, AUD and NZD).

Fundamental data in the US supported the dollar: the Fed delivered its anticipated third rate hike of 2018, the final GDP for the second quarter was 4.2 percent. Fed Chair Powell’s speech and press conference after the FOMC was a big factor in the rise of the dollar after the market had already priced in the 25 basis points lift to interest rates. Mr Powell will speak next week on Tuesday, October 2nd on the topic of employment and inflation. This will officially kick off jobs week in the US.

The main event will be the release of the biggest economic indicator on Friday, October 5 at 8:30 am when the U.S. non farm payrolls (NFP) is published.

  • US manufacturing and service PMIs could signal growth slowdown
  • UK leading indicators expected to remain flat
  • US NFP report to show economy added 190,000 jobs

Euro Hit by Political Turmoil and Inflation Softness

The EUR/USD lost 0.26 percent on Friday. The single currency is trading at 1.1610 and accumulated 1.16 percent in losses during the week. A higher than predicted Italian budget for 2019 at 2.4 percent and softer core inflation in the eurozone put downward pressure on the currency.



European stock markets were hit by the news as political turmoil once again threatens the European Union.

The other shoe dropped when inflation slowed down in the Eurozone in the same week that the U.S. Federal Reserve hiked rates and was optimistic about economic growth in the US.

The monetary policy divergence between the Fed and other major central banks was clear this week as fundamentals back the US policy makers, while questions remain on how effective other policy makers around the world have been.

Loonie Rises as GDP Data Validates October Rate Hike

The Canadian dollar rose on Friday after the monthly gross domestic product (GDP) beat the forecast with a 0.2 percent gain. The loonie is up almost 1 percent on the final day of the trading week. The currency is still showing a weekly loss against the greenback as NAFTA uncertainty and the U.S. Federal Reserve rate announcement put downward pressure.

The rise today comes with higher expectations of a Canadian interest rate lift in October. The Bank of Canada (BoC) held rates in September ahead of a highly anticipated Fed rate hike in September that came to pass. The US central bank has forecasted another rate hike in 2018 and 2 or 3 more next year as part of its economic projections published Wednesday.


usdcad Canadian dollar graph, September 28, 2018

BoC Governor Stephen Poloz spoke on Thursday addressing the rising inflation and Friday’s GDP data point puts a rate hike firmly on the table in the short term.

NAFTA negotiations have not made big inroads as the US met with Canada with the goal of turning two bilateral agreements into a trilateral one.

With a considerable amount of work still to be done in bridging the gap between US and Canada, the US-Mexico agreement will be published tonight with a possibility of leaving the door open for Canada to join.

It is that possibility that has kept the loonie gaining despite the NAFTA train moving without Canada.

Crude Surges as Supply Concerns Push Prices to 4 Year Highs

Oil prices surged on Friday as supply concerns took crude to four year highs. The news that China is cutting back on Iranian oil purchases triggered a rally where Brent and WTI had a 1.40 percent one-day gain. Brent is on track to a 5.34 percent gain during the week with WTI clocking in at 3.66 percent.

The US sanctions against Iran don’t kick into effect until November, but the harsh penalties threatened against those who do have made Iranian crude purchases drop.


West Texas Intermediate graph

China’s Sinopec Corp is slashing its loadings in half to avoid the wrath of Washington. In August Sinopec planned to offer Tehran a lifeline by circumventing the sanctions as it reduced US oil purchases due to the rising trade turmoil between the US and China.

The decision by the Chinese state owned energy company will deal a huge blow to Iran as China is its biggest customer.


West Texas Intermediate graph

The shortfall from Iranian crude sales does not have a short term solution after US Energy Secretary Rick Perry said earlier this week that the US would not tap into its emergency crude reserves to bring prices down.

US President Donald Trump had implied during his UN General Assembly speech that unless the OPEC increase production levels America’s would utilize its position as the largest energy producer in the world.

Gold Gains But US Dollar to Limit Recovery

Gold rose 0.67 percent on Friday but the strength of the US dollar after the U.S. Federal Reserve lifted interest rates this week proved to be too much for the yellow metal that will end up losing 0.49 percent on a weekly basis.

The Fed raised the benchmark rate by 25 basis points and the futures market is pricing in a 78.5 percent probability of a lift in December. Gold traders will look ahead at next week’s manufacturing and service PMIs for more guidance as the US economy continues to grow. Friday’s U.S. non farm payrolls (NFP) will be the final test of the yellow metal.



The US is expected to add 190,000 jobs with average hourly earning rising 0.3 percent. Higher inflation expectations validate the Fed’s forecasts and the market is pricing in a rate hike in December and follow ups in 2019.

Market events to watch this week:

Monday, October 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Tuesday, October 2
12:30am AUD Cash Rate
12:30am AUD RBA Rate Statement
4:30am GBP Construction PMI
12:45pm USD Fed Chair Powell Speaks
Wednesday, October 3
4:30am GBP Services PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
Thursday, October 4
9:30pm AUD Retail Sales m/m
Friday, October 5
8:30am CAD Employment Change
8:30am CAD Trade Balance
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change

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

USD/CAD Canadian Dollar Sensitive to NAFTA Headlines

The Canadian dollar fell after US Trade Representative Lightizer said that time is running out with Canada on NAFTA talks. The US has pressured Canada to join the US-Mexico trade agreement but various deadlines have come and gone with no results.

The US wants to get this negotiation wrapped up as soon s possible to be able to present a trilateral deal to congress ahead of the mid-term elections.


usdcad Canadian dollar graph, September 25, 2018

Gaps remains between the two sides, with the most visible ones are access to the Canadian dairy market and the dispute resolution mechanism.

Elections in the province of Quebec, where a large number of dairy farmers are located, complicates matter as Canada realistically could not make big concessions until after the election.


West Texas Intermediate graph

The Canadian dollar is stuck in a tight range on Tuesday. Earlier in the session it was gaining on the US dollar, but the words from Lightizer put the loonie in a back foot, despite the rise in oil prices supporting the currency.

NAFTA Deal Close But Doubts Remain OANDA Market Beat

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.

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The USD/CAD gained 1.01 percent in the first week of September. The currency pair traded at 1.3173 on Friday after a tale of two reports put downward pressure on the loonie.

The Canadian and US jobs reports were published on Friday at the same time.

While the US economy added 201,000 and saw wage growth.


usdcad Canadian dollar graph, September 11, 2018

The Canadian economy lost 51,600 jobs in August and the unemployment rate rose to 6 percent.

The Canadian dollar was on the back foot most of the week given the uncertain future of the US-Canada trade negotiations.

The silver lining came on Thursday after Bank of Canada (BoC) Deputy Governor Carolyn Wilkins said that a breakdown in the US-Canada trade talks would not keep the central bank from raising interest rates.

OANDA Market Beat Risk Aversion Boosts Dollar

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.

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.

The US dollar appreciated versus most major pairs on Friday. The Japanese yen outperformed the greenback as a safe haven, but all other major currencies suffered heavy losses during the week. Tense trade developments between China and the US and Friday’s drop in the Turkish lira dragged emerging and developed markets lower as US sanctions were doubled. Geopolitics drowned out most of the impact of economic releases with US inflation hitting a new high and Canadian part time jobs driving a drop in the unemployment rate.

– Turkish lira fell more than 20 percent in a week
– US retail sales to remain subdued
– UK retail sales to show more evidence of solid summer

Dollar Higher as Risk Appetite Vanishes

The US dollar appreciated versus most major pairs on Friday. The Japanese yen outperformed the greenback as a safe haven, but all other major currencies suffered heavy losses during the week. Tense trade developments between China and the US and Friday’s drop in the Turkish lira dragged emerging and developed markets lower as US sanctions were doubled. Geopolitics drowned out most of the impact of economic releases with US inflation hitting a new high and Canadian part time jobs driving a drop in the unemployment rate.

  • Turkish lira fell more than 20 percent in a week
  • US retail sales to remain subdued
  • UK retail sales to show more evidence of solid summer

European Bank Exposure to Turkey Hits EUR

The EUR/USD lost 1.2 percent in the last five days. The single currency is trading at 1.1398, with the pair looking to fall further after breaking through the 1.14 barrier. The economic calendar does not feature major events in Europe and with current geopolitical tension the single currency remains vulnerable against the safe haven dollar.



US inflation is 2.94 percent, and with core inflation is back to 2008 levels at 2.4 percent the case for two more rate hikes by the U.S. Federal Reserve this year remains strong. The monetary policy divergence between the European Central Bank (ECB) and the U.S. Federal Reserve has been a factor, but remains in the background as geopolitical forces have proven to have a bigger impact in 2018.

Italian, Spanish and French banks are reported to have loans worth $150 billion in Turkey. The falling Turkish lira will make those loans denominated in foreign currency harder to repay which is why the EUR has touched record lows on Friday. The European stock market has already witnessed a sell off of financial institutions.

Turkey President Erdogan was defiant and called for the population to defend the currency by selling their US dollars and gold holdings instead of trying to open a dialogue with the US regarding steel tariffs.

Loonie Grounded Despite Strong Jobs Report

The USD/CAD gained 0.77 percent during the week. The Canadian dollar is lower on Friday. The USD/CAD is trading at 1.3145. Statistics Canada released a stronger than expected employment report with a huge gain of 54,100 jobs driving the unemployment rate down to 5.8 percent in July. The loonie failed to gain momentum from that economic indicator release given the current geopolitical climate.


Canadian dollar weekly graph August 6, 2018

A flight to safety from investors has given a boost to traditional safe havens like the JPY, CHF, USD and gold. The Turkish lira has been in free fall and has triggered contagion fears as Spain, Italy and France have high exposures.

The strong jobs report adds to the probability the Bank of Canada (BoC) will hike the benchmark interest rate one more time in 2018. The BoC raised its overnight target rate to 1.50 percent on July 11 with the growth of the economy picking up for a follow up rate hike in October.

The Canadian currency was lifted by the solid jobs report, but not enough to send the loonie into the black on Friday. The indicator comes during a tense trading environment where risk appetite is subdued. 

Pound Lower on Brexit Despite Strong GDP Numbers

The GBP/USD lost 1.64 percent in the last five days. The currency pair is trading at 1.2755 near a one year low after no deal Brexit probabilities rose. The divorce negotiations between the UK and the EU have been short on positives with an 8 month period to sort out a lot of tough negotiations.



The market has priced in the scenario of the UK exiting the single market with no trade deal in place. The ball is back on the government of Theresa May to come up with a package that not only satisfies supporters at home, but more importantly is acceptable for the EU. So far that balancing act has not been achieved and has put the leadership of Theresa May into question with an almost imminent vote of confidence in the near term.

The decision of the Bank of England (BoE) to lift rates last week was unanimous, but it could end up being the only pro-active decision by the central bank in 2018 as it heads into reactive territory.

Yen Keeps Up With Dollar in Turbulent Times

The USD/JPY lost 0.51 percent during the last five trading sessions. The currency pair is trading at 110.59. The Japanese currency has appreciated but it has done so less than other times of uncertainty in the market. The use of economic sanctions by the Trump administration was a recurring theme this week causing high volatility in emerging markets.



The JPY continues to trade in a tight range despite the global uncertainty but the safe haven appeal of the currency has set it apart from other Asian currencies that have depreciated as trade war concerns rise.

Market events to watch this week:

Tuesday, August 14
4:30am GBP Average Earnings Index 3m/y
9:30pm AUD Wage Price Index q/q
Wednesday, August 15
4:30am GBP CPI y/y
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:30am USD Crude Oil Inventories
9:30pm AUD Employment Change
Thursday, August 16
4:30am GBP Retail Sales m/m
8:30am USD Building Permits
7:30pm AUD RBA Gov Lowe Speaks
Friday, August 17
8:30am CAD CPI m/m

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

Dollar Awaits Jobs Report Amid Trade Uncertainty

The US dollar is higher against major pairs on Thursday in anticipation of a strong U.S. non farm payrolls (NFP). The U.S. Federal Reserve kept rates unchanged on Wednesday and without a press conference there was little guidance for the markets who will have to wait until the minutes from the Federal Open Market Committee (FOMC) meeting are published in two weeks. Two more rate hikes are forecasted to the Fed funds rate in 2018, but the economic indicators will have to validate them. The U.S. non farm payrolls (NFP) will be published on Friday, August 3 at 8:30 am EDT. Investors will be quick to scan the report for the wage growth and unemployment rate components.

  • US expected to add 190,000 jobs
  • US wages could have gained 0.3 percent
  • Unemployment rate in the US to drop to 3.9 percent

Dollar Rises on Safe Haven Flows

The EUR/USD lost 0.62 percent on Thursday. The single currency is trading at 1.1587 as the US dollar rose as investors sought a safe haven as trade tensions once again flared up between the United States and China.The Trump administration proposed a 25 percent tariff on $200 billion Chinese goods with China expected to retaliate.



Friday’s economic data release will be highly focused on US indicators. The employment report by the Bureau of Labor Statistics will be the main attraction but geopolitics will continue to guide the market if trade war concerns do not subside.

The US stock market closed with gains across the board, with the exception of the DJI. Apple became the first company to break above the $1 trillion capitalization. Not unlike Brexit negotiations it is still too early to say what effect the looming trade war between the US and China will have on markets as there is still the possibility that both sides will reach an agreement.

US Commerce Secretary Wilbur Ross said on Thursday that the tariffs are thought through but a compromise is being worked on by the US President. 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.

Pound Lower Despite BoE Rate Hike

The GBP/USD fell 0.84 percent on August 2. The pound is trading at 1.3015 after a Super Thursday that included a unanimous vote from the Monetary Policy Committee to raise the benchmark interest rate by 25 basis points. The decision to lift rates to 0.75 percent was heavily anticipated by the market. The currency rebounded temporarily on the announcement but quickly dropped as the press conference by BoE governor Mark Carney presented a gradual path in the future.



Governor Carney told the BBC that a rate hike a year was a good rule of thumb but questions remain on the timing of the decision. The EU divorce concerns continue to hang over the UK as Prime Minister Theresa May has not been able to find the perfect compromise between hard and soft Brexit.

The BoE elected to act now based on hard economic data than wait for the unclear outcome of the Brexit negotiations. The deadline is still 8 months away, but there is a lot of issues where not only are the UK and the EU apart, but there is no clear consensus between members of May’s cabinet.

Loonie Falls Ahead of NFP and Trade Disputes

The USD/CAD gained 0.13 percent in the last 24 hours. The currency pair is trading at 1.3026 after the US dollar rose and the loonie failed to get traction from a rebound in oil prices. West Texas Intermediate is trading at $69.54 ahead of US rig data due on Friday.


usdcad Canadian dollar graph, August 2, 2018

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The Bank of Canada (BoC) lifted interest rates by 25 basis points on July 11 and after a stronger than expected monthly GDP report 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.

Market events to watch this week:

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

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

Dollar Rebounds in Anticipation of Q2 GDP Release

The US dollar is higher across the board against major pairs on Thursday. The first estimate of second quarter gross domestic product (GDP) in the US will be published on Friday, July 27 at 8:30 am EDT by the Bureau of Economic Analysis. The dollar gained ground on the euro after the European Central Bank (ECB) held interest rates unchanged as expected but said rates would be steady a year from now. The first release of GDP data for the second quarter is released 30 days after the end of the quarter with economists and analysts expecting it to be one of the best quarters in recent years. How good will the final number be has been the subject of commentary from President Trump and other members of his administration while some forecasters are lowering their estimates after a disappointing durable goods order data point.

  • US 2Q GDP forecasted at 4.1 percent
  • President Trump has told associates GDP is around 4.8 percent
  • Some forecasters have cut their estimates due to recent soft data

EUR Lower as ECB Plays it Safe

The EUR/USD lost 0.57 percent on Thursday. The single currency is trading at 1.1661 after the central bank kept rates and the quantitive easing program unchanged. The July meeting was almost a beat for beat replay of the June meeting, leaving investors with almost no new information. There was no clear guidance on the vague meting of summer of 2019 as the time horizon to lift rates.



The US GDP release will be the main market event of the week as it could come in above 4 percent. There is an open debate between economists on how much did the Trump tax cuts influenced the positive momentum. The U.S. Federal Reserve is scheduled to meet for two days next week. There are no expectations of a rate lift, but the data has so far validated the two rate hikes and more to come.

The meeting between Donald Trump and Jean-Claud Juncker was a win for the USD as it seemed Europe had conceded to American demands even if the goal is to reach zero tariffs. With trade tensions easing the market turned to monetary policy and growth divergence ahead of the Q2 GDP release on Friday morning.

The USD will face a serious challenges in August. Central banks are expected to close the monetary policy gap and retaliations from China on trade could end up hurting the American economy in the long term. Politics will also add some uncertainty to the US dollar as midterm elections approach with a forecasted Democratic win that change the power dynamics in Washington.

Brexit Fears Overpower BoE Rate Hike Expectation

The GBP/USD lost 0.59 percent on Thursday. The currency pair is trading at 1.3110 as the USD rebounded from yesterday’s losses. The Bank of England (BoE) is heavily anticipated to lift rates next week after the last monetary policy committee had three members who dissented from holding rates. Investors are pricing in a 81 probability of higher interest rates on Thursday but the divorce between the United Kingdom and Europe put more pressure on sterling.



The lack of an unified front within the Conservative party on which Brexit to pursue has left Prime Minister Theresa May with just eight months to figure out a lot of issues. The GBP has fallen as more uncertainty grips investors hopes of a comprehensive trade deal that keeps the UK as a participant of the single market.

Loonie Lower Despite NAFTA Optimism

The USD/CAD gained 0.20 percent in the last 24 hours. The currency pari is trading at 1.3072 ahead of the release of the second quarter GDP data in the US. The pair almost touched 1.32 at the at the beginning of the week, but a rebound from the loonie took the currency to near 1.3050. The optimism surrounding the NAFTA renegotiation was behind most of the move with the Canadian currency touching a six week high. The meeting between US President Trump and EU Commission chief Jean-Claude Juncker had a positive outcome although it was scarce on details and did not directly address the tariffs on steel and aluminum that will remain in place.



The change in leadership in Mexico gave the locked NAFTA negotiations a chance for a fresh start. The comments from advisors to elected-president Andres Manuel Lopez Abrador have been pro-NAFTA and the Trump administration came out in support of a quick resolution. It is unclear if the US is willing to drop the two more contentious issues it has pushed on the table, the sunset clause and the higher American percentage of US parts on autos. U.S. Trade Representative Robert Lighthizer has said that the negotiation is in its finishing stages, but so far the biggest issues remain up in the air.

Market events to watch this week:

Friday, July 27
8:30am USD Advance GDP q/q

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

Dollar Rally Ends With Trump Monetary Policy and Currency War Comments

The USD fell against major pairs on Friday after US President Donald Trump tweeted that China and the EU manipulate their currency. Trade war escalation has reached a second phase at a time when American politics are having an identity crisis with the ongoing Russian interference during the 2016 elections. Steven Mnuchin will head to Buenos Aires to take part in the finance ministers G20 meeting with trade and monetary policies sure to be a topic of discussion. The European Central Bank (ECB) will announce its main refinancing rate on Thursday, July 26 at 7:45 am EDT with little expectations of a change. ECB President Mario Draghi will host a press conference at 8:30 am EDT with the market focused on his comments for insights into the monetary policy of the central bank.

  • US President worried about Fed’s monetary policy triggers currency war
  • European Central Bank meeting anticipated to be a quiet affair
  • Canadian inflation and retail sales beat expectations

EUR Rises Ahead of ECB as Currency War Concerns Rise

The EUR/USD gained 0.28 percent in the last week. The single currency is trading at 1.1717 after a volatile week is over. The EUR rose 0.73 percent on Friday as Trump’s comments on currency manipulation hit the newswires. The US dollar had fallen on Thursday after President Trump criticized the U.S. Federal Reserve for raising rates and eroding the competitiveness of American products.



In an interview with CNBC the US President said he was not thrilled with the path of interest rates, although he did mention that he would let them do what they feel is best. Earlier in the week Fed Chair Powell testified before the Senate Banking Committee and the House Financial Services Committee side-stepping any comments on trade spats.

The U.S. Federal Reserve has hiked two times already in 2018 leaving the benchmark rate at 175 to 200 basis points. The CME FedWatch tool shows a 86.9 percent chance of a September rate hike and 53.9 percent of a follow up in December. Both sets of probabilities where higher on Wednesday before Trump’s comments were released.

The economic calendar will not feature a large number of North American indicators with the main standout being the release of the first estimate of the US GDP data on Friday, July 27. Analysts forecast a rise of 4.1 percent and could serve as an antidote to Trump’s tweets. The European Central Bank (ECB) will feature on Thursday, but there is little expectation that new guidance will be provided after the June monetary policy meeting.

Loonie Higher on Strong Retail Sales and Inflation Data

The Canadian dollar rose on Friday after the release of retail sales and inflation data. The USD/CAD DROPPED 0.05 percent on a weekly basis. The currency pair is trading at 1.3146 after Canadian retail sales surprised with a 2 percent rise to a seven month high boosted by auto and gasoline sales on Friday. Inflation rose 2.5 on an annual basis in June also impacted by higher gasoline prices. The economic indicators validate the decision of the Bank of Canada (BoC) earlier this month to hike rates by 25 basis points and could further pressure the central bank to lift rates higher despite growing geopolitical headwinds.


Canadian dollar weekly graph July 16, 2018

The US dollar has been on a downward trend since President Trump issued some sharp criticism on the U.S. Federal Reserve monetary policy. The comments took the market by surprise as talking about the currency is not usually the job of the President, but rather the Treasury Secretary. The statements will most likely be discussed as the G20 meeting in Buenos Aires kicks off.

The US President continued to tweet about the unfair strength of the greenback which responded by falling more than 1 percent against the Canadian dollar.

Oil prices recovered from losses earlier in the week but West Texas Intermediate will finish below $70 after concerns about the increase in supply outstripping rising demand.

The GBP/USD dropped 0.76 percent in the last five days. The currency pari is trading at 1.3133 with political headwinds keeping the pound under pressure. The confusing Brexit strategy from the UK government could end up costing Prime Minister May her job as she scrambles to call an early summer recess to avoid challenge to her leadership.



The Bank of England (BoE) held rates unchanged in June, but there were three dissenters. The economic data could support an August rate hike by the central bank, but the question now is will MPC vote for higher rates holding to its mandate, but with a high possibility that Brexit negotiations once again threaten the growth of the UK economy and the reverse action is needed. The market still believes in an August rate hike, but the GBP will continue under pressure from political uncertainty at home and abroad.

Market events to watch this week:

Tuesday, July 24
9:30pm AUD CPI q/q
Wednesday, July 25
10:30am USD Crude Oil Inventories
Thursday, July 26
7:45am EUR Main Refinancing Rate
8:30am EUR ECB Press Conference
8:30am USD Core Durable Goods Orders m/m
Friday, July 27
8:30am USD Advance GDP q/q

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