Pound suffers on Brexit stalemate

 

Pound pressured at start of the week

Weekend news that the latest Brexit negotiations had hit yet another stalemate pressured the pound at this week’s open. UK’s Financial Times reported that PM May is said to call the current draft Brexit deal a “non-starter” and as a result EU leaders may cancel plans for a special summit in November due to the lack of progress in negotiations. EU leaders are supposed to convene for a Brexit summit this Wednesday, and hopes were that a deal could be announced.

GBP/USD hit its lowest level in six days and tested the 100-day moving average support at 1.3099 again. The FX pair had climbed to a three-week high of 1.3259 on Friday on deal hopes, but closed lower on the day. Should the 100-day moving average support be breached convincingly, then the 55-day average at 1.2990 would come in to focus.

 

GBP/USD Daily Chart

Source” Oanda fxTrade

 

Asia Market Update: Echoes of October past

RBA’s Harper reiterates current stance

RBA board member Ian Harper has reiterated the RBA view that interest rates are more likely to rise than fall, however added that a near-term rate increase would “spook” consumers. He commented that a cloud remains over the consumer outlook though some stimulus is coming from a lower Australian dollar, which is helping to support confidence.

Monthly retail sales growth has been either zero or positive over the past eight months, though not setting the economy alight, with a maximum reading of +0.6% in February and the August reading at +0.3%. Meanwhile, Westpac’s consumer confidence index rose above zero for the first time in three months this month.

Aussie has been on the defensive versus the US dollar this morning, looking set to post a decline for the second straight day. AUD/USD is currently at 0.7107 with this month’s previous lows above the 0.7040 level acting as support.

 

AUD/USD Daily Chart

Source: Oanda fxTrade

 

US retail sales expected to show a rebound in September

The Asian data calendar is not yet complete, with Japan’s industrial production and capacity utilization data still pending. The European calendar is barren of tier-1 data, and the highlight of the North American calendar will be US retail sales for September. Sales are expected to rise 0.5% m/m, more than the 0.1% posted for August, and would be back at the June/July levels. The Empire State manufacturing index and business inventories are also due. The Bank of Canada’s business outlook survey is the only release from north of the border.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

Market Podcast October 15

Source: MarketPulse – Market Podcast October 15

Gold gains most in more than two years

Gold is back in favor

The safe haven of gold, very much unloved over the past few months as it stood in the dollar’s shadow, saw its fortunes reverse yesterday to record the biggest one-day gain in almost 2-1/2 years. A weaker US dollar amid easing US yields and a below-forecast CPI print, reduced demand for the greenback, leaving gold to take up the slack, for a change.

Gold jumped more than 2.5%, its biggest one-day gain since June 2016, to reach the highest level since July 31. The commodity is now testing the 100-day moving average at 1,228.99, which has capped prices since April 30.

 

Gold Daily Chart

Source: Oanda fxTrade

 

China’s trade surplus with US hits record high

The September trade numbers will likely not be music to Mr Trump’s ears. Exports rose 14.5% y/y, beating economists’ estimates of a mere 8.9% increase. That’s the biggest monthly gain since February. The overall trade surplus widened to $31.7 billion, the highest in three months.

China Customs also reported that exports to the US were up 16.6% y/y while imports from the US rose just 1.6% y/y, pushing the trade surplus with the US to a record high $34.1 billion. The agency commented that the impact from the US trade frictions was “controllable” and that Chinese exporters were diversifying their markets.

The reaction in FX markets was marginal. AUD/USD slid to 0.7118 from 0.7124 while USD/CNH rebound from intra-day lows to 6.9026. AUD/USD currently appears to be struggling to overcome previous highs in the 0.7130-31 window.

 

AUD/USD Hourly Chart

Source: Oanda fxTrade

 

Singapore tightens policy marginally as Q3 growth beats estimate

In its semi-annual policy review, Singapore’s de-facto central bank tightened policy by a minimal amount. Rather than fix a benchmark interest rates, Singapore manages monetary policy by guiding the value of the local dollar against a basket of currencies of its major trading partners. The MAS raised “slightly” the slope of appreciation of the net effective exchange rate (NEER) trading band of the Singapore dollar, keeping the width and center of the band unchanged. This was tantamount to a mild tightening of monetary conditions as latest surveys had suggested it was a 50/50 chance.

Looking ahead, the MAS sees 2018 growth in the upper half of a 2.5% to 3.5% range then moderating “slightly” in 2019. Core inflation is seen in a 1.5% to 2.0% range and averaging 1.5% to 2.5% in 2019.

The Singapore dollar rose marginally after the announcement, with USD/SGD poised to record its second consecutive daily loss. USD/SGD is now at 1.3739 with the 100-day moving average below at 1.3637.

 

USD/SGD Daily Chart

Source: Oanda fxTrade

 

One of the first nations to report Q3 GDP numbers, Singapore’s economy grew 2.6% y/y, faster than the than the 2.5% growth anticipated by economists, but slower than the 3.9% pace in Q2. On a quarterly basis, growth was below expectations of a 4.9% increase, but faster than the 0.6% posted in Q2.

China will release its Q3 GDP data next Friday and is also expected to show slower annualized growth from Q2. The latest survey suggests 1.6% q/q and 6.6% y/y from 1.8% and 6.7% respectively.

 

 

Will German CPI echo the US miss?

After yesterday’s release of below-forecast CPI data from the US, today it’s the turn of Germany. Estimates for September suggest consumer prices rose at the same pace as August, up 0.4% m/m and 2.3% y/y. August industrial production data for the Euro-zone follow the CPI numbers and then the calendar thins out with only second-tier US data scheduled. Export and import prices and Michigan sentiment index are the highlights, with speeches from Fed’s Evans and Bostic completing the week.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

Have a great weekend from Asia.

Dollar Lower on Weak Inflation OANDA Market Beat Podcast

Source: MarketPulse

Pace of equities’ declines slows as Asia mulls Wall Street weakness

Asia shares pressured, but not dramatic

With the biggest one-day losses in about eight months plaguing Wall Street yesterday, Asian equities continued the bearish sentiment, though not quite to the same degree. Considering the US30 index fell 3.9%, the SPX500 4% and the NAS100 5.3%, today’s losses of 0.97% for the JP225 CFD and 2.4% for the HK33 index and 0.66% for China shares appear small by comparison.

Does this mean that yesterday’s sell-off was purely technical in nature, and thereby short term? Certainly there were no specific new headlines to induce the selling, just the usual trade wars, high US yields and Brexit, which have been with us for a few days/weeks now.

However, the SPX500 index has traded below the 200-day moving average for the first time since May 4 today, hitting its lowest in just over three months. The NAS100 index had broken through the same moving average in late trading yesterday, though the US30 index is still holding above it so far. These breaches could suggest that the current correction may have further to run, as technical momentum models may trigger more selling signals.

 

SPX500 Daily Chart

Source: Oanda fxTrade

Euro gets a leg up

The Euro was one of the top performers versus the US dollar in the Asian session, seemingly helped by talk that Italy aims to reduce its deficit to GDP ratio to 2% by 2020. Though this news was first mentioned last week, nevertheless markets appeared to relish any sign of better news. EUR/USD rose as much as 0.44% to 1.1571, the highest in more than a week, before settling back at 1.1567. A potential candlestick doji reversal pattern on Tuesday has been confirmed with an up-day yesterday and, combined with bullish divergence on the stochastics indicator, the pair has traded higher today.

In the broader market, the US dollar retreated 0.18% against a basket of six major currencies.

 

EUR/USD Daily Chart

Source: Oanda fxTrade

 

US consumer prices in the spotlight

The highlight on the data calendar today will be the release of US CPI for September. Prices are seen rising at a slower 2.4% y/y pace than August’s 2.7%, and this would be welcome music to the Fed’s ears as inflation has hovered above the 2% target level for some time.

Aside from the US CPI data, we hear speeches from Carney and Vlieghe at the Bank of England and EIA data on crude oil inventories and natural gas storage as at October 5. The US 30-year bond auction may draw attention as yesterday’s 10-year auction saw the highest yield since 2011, as demand fell to its lowest since February.

You can view the full MarketPulse calendar at https://www.marketpulse.com/economic-events/

 

OANDA Trading Podcast Market Update (11 Oct 2018)

OANDA Trading Podcast Market Update (11 Oct 2018) 938NOW

AUD/USD breaches 0.71 despite positive trade data

AUD/USD through 0.71

Despite an expansion in Australia’s trade surplus and a better than expected print, the Aussie could not gain any benefit as the US dollar continues its upward trek. The trade surplus grew to A$1.6 billion in August, up from A$1.55 billion the previous month and higher than economists’ forecasts of a decline to A$1.4 billion. The improvement came from a rebound in exports which rose 1% after a 1% slump in July. Imports were flat.

Despite the improvement, AUD/USD fell through 0.71 for the first time in three weeks as the US dollar extended yesterday’s surge. The dollar, as measured against a basket of six major currencies, climbed to its highest level since August 17 as US 10-year yields held steady near seven-year highs. The FX pair is currently at 0.7095 and may find some support near the September 11 low of 0.7084.

 

AUD/USD Daily Chart

Source: Oanda fxTrade

 

EUR/USD at 6-1/2 week low

As the US dollar soars, so the Euro suffers with yesterday’s news that Italy was adjusting its longer-term deficit-to-GDP ratios lower, quickly forgotten. The FX pair traded down to 1.14625 yesterday, the lowest since August 20 and today has seen the pair extend its current losing streak to a seventh straight day. The pair is currently sitting at 1.1468 with Fibonacci support at 1.1403.

NOTE: The are EUR1.5 billion worth of EUR/USD puts expiring tomorrow at strike of 1.1450

 

EUR/USD Daily Chart

Source: Oanda fxTrade

 

World Bank maintains China 2018 GDP growth forecast

The World Bank announced that it was keeping its 2018 GDP growth forecast unchanged at 6.5%. The latest Bloomberg survey of economists shows forecasts of a median estimate of 6.6% growth in 2018, slowing to 6.3% in 2018.

Within the release, the World Bank upped its forecasts for Thailand and Vietnam while trimming those for Indonesia, Malaysia and the Philippines.

 

No stopping the US dollar runaway train at the moment

 

Factory orders to affirm strong economy

After the bazooka of the ISM non-manufacturing PMI and the ADP employment report yesterday, the US data calendar calms down a bit today with September Challenger job cuts and August factory orders on tap. Orders are seen rebounding strongly by 2.1% m/m from July’s 0.8% decline, further emphasizing the robust state of the economy. Note that back in August, the new orders index in the ISM manufacturing PMI jumped to 65.1 from 60.2 but fell to 61.8 in September. This could be a sign of what might happen to factory orders next month.

Other items on the data calendar include speeches from Fed’s Quarles (neutral, voter) and ECB’s Coeure while Canada’s Ivey PMI for September completes the deck.

 

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

GBP/CAD – Vulnerable to further downside (video)

Nick Batsford, CEO of Core London is joined by Craig Erlam, Senior Market Analyst at OANDA to discuss GBPCAD. Craig explains why he believes the pair could be vulnerable to further selling given the Brexit uncertainty, USMCA deal and rising oil prices.

Euro jumps as Italy revises budget plans

Euro jumps on Italy budget headline

Italy is trying hard to convince the rest of Europe that its move to increase the deficit-to-GDP ratio to 2.4% in 2019 is only a temporary move. Today, the Italian press reported that the government aims to get it back down to 2% by 2021. This is contrary to earlier reports that the Italian government had agreed a 2.4% ratio for the full 2019-2021 period. Italy’s debt-to-GDP ratio is currently estimated at a whopping 131% and the government sees is being trimmed to 127% by 2021.

EUR/USD had a 30 pip move higher to 1.1595 on the news, though stopped short of the 55-day moving average at 1.1614. The 100-hour moving average currently sits at 1.1612 as well. The pair is now at 1.1585. The news also helped the broader risk appetite with USD/JPY up 0.04% to 113.73 and the US dollar weakening 0.22% against a basket of six major currencies.

 

EUR/USD Hourly Chart

Source: Oanda fxTrade

 

Aussie falls as building permits slump

AUD/USD fell further from the 0.72 handle in Asian trading in a knee-jerk reaction to news that building permits slumped a hefty 13.6% year-on-year in July, much worse than economists’ estimates of a 2.5% decline. July’s drop was the worst in 12 months and comes despite the RBA holding rates at record lows. Even the big Australian banks didn’t start to increase rates on flexible rate mortgages due to higher funding costs until late-August, so there’s a chance that next month’s numbers could be equally disappointing.

AUD/USD fell as much as 0.34% to 0.71654 though failed to break below yesterday’s two-week low of 0.71632 and has since rebounded to 0.7182 on the shift in risk appetite

 

AUD/USD Daily Chart

Source: Oanda fxTrade

 

Trend of softer PMIs continues

The global tale of weaker PMIs was extended to Singapore today, as the Nikkei full economy PMI fell to 49.6 in September, the first dip below the contraction/expansion threshold in about 2-1/2 years. Declines were noted in both the output index and the new orders index, which is perhaps more of a concern going forward. USD/SGD showed little reaction, following more the broader trend of a weaker US dollar on the day as the pair rose 0.02% to 1.3734.

 

US markets rescue global risk sentiment yet again

 

PM May to speak at party conference

Perhaps the biggest event to grad the headlines today will be PM Theresa May’s speech at the Conservative party conference later today. Yesterday, Boris Johnson received cheers after he attacked her Brexit policies, so let’s see how she responds. Watch out for those Brexit headlines.

Other data releases include Market services PMIs for both Germany and the Eurozone along with EU retail sales for August. In the US we get to see the ADP employment report, the customary forerunner to Friday’s nonfarm payrolls, and the ISM non-manufacturing PMI. There’s a host of Fed speakers with Barkin, Brainard, Mester and Powell all on tap.

 

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

OANDA Trading podcast: Asia Market Update @938 Now(3 Oct 2018)

Source: MarketPulse

USD/CAD hits 4-1/2 month low on reports of NAFTA deal

USD/CAD drops to lowest since May

USD/CAD fell to its lowest level since May 23 following reports in the financial press that the US and Canada were “very close” to agreeing to a revised NAFTA ahead of an Oct 1 deadline. Later, the deal was largely confirmed as PM Trudeau said it was “a good day for Canada” while the Mexican foreign minister added it was “a good night for Mexico and for North America”.

The deal would allow Canada to join the agreement reached between the US and Canada back in August. Sources suggest that Canada exports of autos will be capped at a certain level, and Canada is to allow US access to about 3.5% of the domestic dairy market.

 

CTV reports NAFTA a done deal

 

USD/CAD traded below the 200-day moving average at 1.2870 for the first time since April 19, and is now testing the 55-week moving average at 1.2816. The pair is currently holding at 1.2829.

 

USD/CAD Daily Chart

Source: Oanda fxTrade

 

Will US PMIs echo the gloom in China?

The weekend release of China’s manufacturing PMI data for September was disappointing, with the official numbers showing a drop to 50.8 from 51.3 (estimates were for a slight drop to 51.2), the weakest reading in seven months. The PMI has held above the 50 threshold denoting contraction/expansion for the past two years. The Caixin PMI also fell, dropping to 50.0 from 50.6.

NOTE: China markets are closed all week so the reaction in the yuan has been relatively muted

Later today we see how much the US manufacturing sector has been affected by the US-China tariff war. The ISM reading for manufacturing is expected to slip to 60.5 from 61.3, which was a 7-year high, as the impact of the tariffs starts to bite.

 

Fed speakers on tap

The rest of the data calendar features German retail sales for August and the Markit manufacturing PMI for September, UK bank lending and money supply data and Euro-zone’s unemployment rate for August. FOMC members Bostic (dove, voter) and Rosengren (hawk, voter) are due to speak, though neither is likely to shift away from the tone of the FOMC statement.

 

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

 

Oanda’s Innes Sees a Bumpy Ride for Markets in 4Q

Source: MarketPulse

 

USD/JPY at nine-month high as risk returns

The rebound in risk appetite post-Fed continued in the Asian session today, with equity markets rising, the yen in retreat and the US dollar steady to firmer.

USD/JPY at nine-month high

With the yen’s retreat, USD/JPY advanced as much as 0.22% to reach its highest level this year at 113.636. EUR/JPY snapped a two-day losing streak with gains of about 0.2% while AUD/JPY advance 0.24% to 81.91. The Euro is struggling for traction, still weighed down by the Italian budget news, where they appear to have settled for a higher 2019 debt to GDP ratio of 2.4% rather than the sub-2% level that had been talked about previously. EUR/USD is currently at 1.1647, holding above the 55-day moving average at 1.1618.

USD/JPY Daily Chart

Source: Oanda fxTrade

 

Still picking up the FOMC pieces and tying up a few loose ends

 

Equities push higher

The Japan225 CFD powered to its highest since the CFD began trading in 2003 while the China50 index added 0.33%. The Australia200 index is still recovering from its hefty seven-session slide which started on August 30. The index is up 0.1% today, though still below the 55-day moving average at 6,249.15 and is hovering near the 38.2% Fibonacci retracement level of the drop earlier this month, which is at 6,212.40.

Australia200 Daily Chart

Source: Oanda fxTrade

 

Euro-zone consumer prices seen rising

The European session features Euro-zone September CPI, where prices are seen rising at a faster pace than in August. Estimates suggest an increase of 2.1% y/y from 2.0%. The final reading of the UK’s Q2 GDP is not expected to see any change from the +0.4% q/q and +1.3% y/y prior readings, while German unemployment is expected to remain steady at 5.2% in September.

The Fed’s preferred inflation monitor, PCE price index, tops the US data slate along with personal income/expenditure numbers for August. September sentiment indices in the form of the Chicago PMI and Michigan sentiment complete the session. Fed’s Barkin (neutral, voter) is due to speak, but is unlikely to stray much from the Fed’s post-FOMC statement.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

Have a great weekend.

Euro tumbles on talk Italy to delay budget meeting

EUR/USD drops below 1.17

News that Italy may delay its 2019 budget discussion meeting sent shivers through the Euro, with EUR/USD falling as much as 0.43% to sub-1.17 levels for the first time in five days. The pair is now drifting lower after the initial drop, and is heading toward the 100-day moving average, which is sitting at 1.1657. EUR/USD is currently at 1.1698.

 

EUR/USD Daily Chart

Source: Oanda fxTrade

NOTE: EUR1.28 billion of EUR/USD put options expire today at strike 1.1750

Dollar pushes higher as Fed stays the course

After a bit of a delay, Asian traders latched on to the hawkish implications of the Fed statement after they hiked rates at the FOMC meeting.  The value of the dollar, as measured against a basket of six currencies, rose 0.39% in Asia trading following a slight dip toward the NY close.

As it always does, the Hong Kong Monetary Authority also hiked rates by 25bps, while the Reserve Bank of New Zealand, perhaps the most dovish central bank globally, left rates unchanged. NZD/USD traded steady after the meeting but succumbed to the dollar’s rise later on. The pair is currently sitting at 0.6642, just above the 200-hour moving average at 0.6636.

 

NZD/USD Hourly Chart

Source: Oanda fxTrade

 

Mixed results on trade negotiations

Early in the Asian session there was some positive news on the trade war front, though the reaction proved to be fleeting US President Trump had said that he intended to call Chinese President Xi sometime today to talk about tariffs. The initial reaction was positive, though this was swallowed up by the US dollar developments. Meanwhile, Trump tweeted yesterday that the China tariffs were having no impact on the US economy.

Still in Asia, the US and Japan are to sit down for trade talks following Trump’s meeting with Abe.  The good news for Japanese auto makers was that the US agreed to hold off on further auto tariffs while the talks continue.

In other trade negotiations, NAFTA discussions appear to be going nowhere. Trump said he rejected a one-on-one meeting with PM Trudeau while informing Congress that moving NAFTA forward without Canada was part of a broader trade initiative. He added that he “disliked” talking to Canada’s negotiators and threatened to tax Canadian autos if no deal was struck. USD/CAD has risen 1.15% over the past five days as talks stalled, and is currently testing the 100- and 55-day moving averages in the 1.3053-1.3059 window, respectively.

 

USD/CAD Daily Chart

Source: Oanda fxTrade

 

Higher German CPI could support the Euro

Consumer prices in Germany for September are expected to maintain the same pace of increase as August, according to the latest survey of economists. CPI seen rising 0.1% m/m and 2% y/y and a figure higher than this could confirm Draghi’s comments earlier this week about price pressures in the economy and force a revision of the ECB rate outlook, which in turn could help the Euro.

The US data slate includes the final reading for Q2 GDP (no revision expected from the +4.2% y/y previously recorded) along with the goods trade balance for August. This is expected to show the first narrowing of the deficit in three months, and no doubt would be music to Donald Trump’s ears. The rest of the calendar is populated with Q2 PCE prices and August durable goods orders.

 

The full MarketPulse data calendar is available at https://www.marketpulse.com/economic-events/

Live FX Analysis – 25 September 2018 (Video)

In this week’s FX webinar, Senior Market Analyst Craig Erlam discusses the upcoming Federal Reserve meeting and provides and update on Brexit and trade wars.

Craig also gives his live analysis on EURUSD (12:04), GBPUSD (17:23), EURGBP (22:05), AUDUSD (24:38), USDCAD (27:24), GBPCAD (28:30), NZDUSD (29:54), USDJPY (30:47), GBPJPY (32:31) and EURJPY (34:25).