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

Dollar holds gains as market awaits tariffs

It’s not will they or won’t they – it’s how much

The market appears resigned to the fact that US President is about to announce the next set of tariffs on $200 billion worth of Chinese imports. There are only two questions to be answered: when? Is it today, tomorrow or later this week? And what percentage? 10% or 25%?

The Wall Street Journal reported that the tariff level will be about 10%, below the 25% the US administration had been considering. The WSJ also reported that there is a growing risk that China would walk away from the proposed trade talks if the tariffs are imposed. After imposing their own retaliatory tariffs, of course.

The US dollar was steady in thin trade during the Asian session. With a Japan holiday and Hong Kong licking its wounds from the passing of typhoon Mangkhut, though financial markets were open, trading was lackluster at best.

USD/HKD gives 7.85 ceiling a breather

USD/HKD retreated from its 7.85 ceiling last week as the US dollar encountered some mild near-term selling pressure. The Hong Kong Monetary Authority has spent HKD95.63 billion ($12.2 billion) defending the upper band of its currency peg since April as the FX pair repeatedly tested the 7.85 level. General demand for the US dollar and outflows from its stock markets are to blame for the pressure. The HKMA commented this morning that it can better deal with any crisis better than in 1997 and 2007. USD/HKD is trading at 7.8578 today after touching 7.8460 on Friday, the lowest since July 26.

USD/HKD Daily Chart

Source: Oanda fxTrade

HKMA Intervention

Source: Bloomberg; Oanda

Euro-zone consumer prices on tap

It’s a slow start to the week on the data front too, with Euro-zone CPI data for August the major event on tap. Prices are seen rising 0.2% m/m and 2.0% y/y, according to the latest survey. Canadian flows data, foreign money into Canadian securities and Canadian money into foreign securities are the only other major data points for markets.

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

Source: MarketPulse

Fundamentals Remain Positive Despite Sell-Off

Despite the recent fluctuations and concern about major corrections in global equity markets, Craig Erlam, senior market analyst at Oanda, says fundamentals, like corporate earnings, remain positive.

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US Dollar Rout Continues With Inflation Data in the Horizon

Safe haven flows after the stock market collapse favour JPY and CHF

The US dollar is once again on the back foot on Tuesday. The currency is softer against major pairs ahead of key US inflation data for January. The U.S. Federal Reserve along with traders will be looking at the consumer price figures for signs of higher inflation and further validations of their plans to keep raising US interest rates in 2018. The U.S. non farm payrolls (NFP) report earlier in the month boosted the USD with a positive wage growth signal at 0.3 percent monthly gain. The market will be watching the core CPI released on Wednesday, February 14 at 8:30 am EST looking for confirmation.

  • US January inflation expected to underperform
  • US Oil producers putting downward pressure on prices
  • US inflation trend to continue on Thursday with the release of the PPI



The EUR/USD gained 0.52 percent on Tuesday. The single currency is trading at 1.2355 ahead of the release of monthly inflation and retail sales data in the US. The U.S. Federal Reserve is expected to lift rates 3 or more times this year, but to do so it would need inflation in the US to pick up, as this was the biggest debate within the central bank last year. Doves within the Federal Open Market Committee (FOMC) are pushing for more patience, until inflation rises, while the hawks who lost Chair Yellen as their biggest supporter would rather raise rates sooner rather than later. The core consumer price index, the Fed pays more attention to this data point that excludes food and energy, is expected to come in at 0.2 percent. Retail sales are forecasted to have gained 0.2 percent in January, but the core reading to have advanced by 0.5 percent by removing auto sales.

The tumble in stocks prices has had a negative effect on the confidence in the US economy. The employment report released on February 2 posted higher than forecasted number of jobs and more importantly hourly wages rose by 0.3 percent. Several dollar rallies that started with a strong employment report have been cut short by disappointing inflation and retail sales data. This time around the USD has not been able to find solid footing in 2018. With a stock market correction and bond yields at four year highs inflation takes a more important role as it could solidify the case of Fed hawks and make way for a 4 rate hike scenario. The USD has been impacted by improving growth around the globe and other central banks have hiked or signalled and end to low rates cutting the lead of the U.S. Federal Reserve and reducing the attractiveness of the dollar. A higher than expected inflation figure could trigger a US currency recovery alongside a drop in the stock market as higher rates would be forthcoming. Vice versa a lower than expected consumer price gain could sink the dollar even lower as the market is already pricing in 3 rate hikes and could start reevaluating that position with weak inflationary pressures.

European politics have reached some stability with the German coalition now in place but with the upcoming Italian elections in March the boat is sure to rock. Economic fundamentals have been strong in the eurozone with Germany leading the way as usual. The gap between the U.S. Federal Reserve and the European Central Bank (ECB) is closing with regarding monetary policy. The ECB is expected to end its QE program and could even lift interest rates later this year. The week will bring minor indicator releases in Europe with the German central bank chief Jens Weidmann speaking in Frankfurt on Wednesday, February 14 at 3:00 am EST. Earlier that day the GDP figures for Germany will be released with a 0.6 percent growth expected.



The USD/JPY lost 0.84 percent in the last 24 hours. The currency pair is trading at 107.73 as the JPY has benefited from risk aversion and risk appetite moves. Usually the USD is the main beneficiary of a risk aversion move, but given some of the global uncertainty is happening in Washington and Wall Street the greenback is not the sturdiest safe haven for investors. The USD is soft ahead of inflation and retail sales data with both having to overcome concerns.

The Japanese Prime Minister Shinzo Abe is expected to reappoint Haruhiko Kuroda as the head of the Bank of Japan (BOJ) for his second term and that in itself could be a sign the central bank is ready to start dealing back some of its massive stimulus program.

Market events to watch this week:

Wednesday, February 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:30am USD Crude Oil Inventories
7:30pm AUD Employment Change
Thursday, February 15
8:30am USD PPI m/m
Friday, February 16
4:30am GBP Retail Sales m/m
8:30am USD Building Permits

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