Live FX Market Analysis – 16 October 2018 (Video)

It’s been another turbulent week in FX markets with last week’s sell-off suitably spooking investors, Saudi Arabia causing a stir following allegations of murder at its embassy in Turkey, Brexit talks stalling and Italy risking the wrath of the European Commission after submitting its budget. Senior Market Analyst Craig Erlam discusses all of these and more in this week’s webinar.

Craig also gives his live analysis on EURUSD (16:37), GBPUSD (18:09), EURGBP (20:05), AUDUSD (21:56), USDCAD (24:25), GBPCAD (29:37), NZDUSD (30:14), USDJPY (31:05), GBPJPY (31:50) and EURJPY (32:40).

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.

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).

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

USD/JPY at highest since July

USD/JPY rallied to its highest level since July 19 as the positive sentiment that lifted Wall Street to record highs continued in the currency markets during the Asian session. The response in Asian equities was not quite so dramatic with the Japan 225 index gaining 0.25% by lunchtime, the Hong Kong 33 CFD rising 0.25% and the China A50 index surging 1.32%%.

Japan shares shrugged off an uptick in longer-term yen yields after the Bank of Japan trimmed its daily purchases of Japanese Government Bonds with a tenor of 25 years and upwards. The 30-year yield hit its highest since October 2017 and the 40-year tenor saw rates at 1.02%, the highest since November 2017.

 

USD/JPY Weekly Chart

Source: Oanda fxTrade

 

USD/JPY is poised for its second weekly gain in a row and is heading toward the 200-week moving average at 113.26 while the July high sits at 113.18.

 

Japan CPI heads in the right direction

A welcome headline for the Bank of Japan saw Japanese consumer prices rise 1.3% year-on-year in August, the fastest pace since February. The headline topped expectations of a 1.1% increase and was a steep acceleration from the 0.9% seen in July. Core CPI was a more benign +0.4% y/y, in line with expectations and higher than July’s 0.3%.

In other Japanese news, Shinzo Abe was elected for his third term as leader of the LDP yesterday and is set to become the country’s longest-serving leader. He wasted no time in getting back down to business as Chief Cabinet Secretary Suga announced that PM Abe will hold a summit with US President Trump on September 26. There is no doubt that the tariff question will be the major topic under discussion.

US-China trade war, yesterday’s news?

S&P Raises Australia outlook to stable

Ratings agency S&P affirmed Australia’s sovereign rating at AAA and raised the outlook from negative to stable. The agency cited an improved fiscal outlook amid government expenditure restraint, with steady revenues supported by the strong labor market and relatively robust commodity prices. The top three ratings agencies now have Australia with a AAA rating and a stable outlook.

There was a muted response to the news from the Aussie as AUD/USD marked time ahead of the 55-day moving average resistance at 0.7315. The pair is currently almost flat on the day having risen for the past four sessions and is facing its strongest up-week in over a year. AUD/USD is now at 0.72935.

 

AUD/USD Daily Chart

Source: Oanda fxTrade

 

More PMI readings complete a slow data week

The slow data week concludes with September Markit PMI readings for both Germany and the Euro-zone, with both expected to show a lower reading than last month. The North American calendar is focused on Canada’s CPI readings for August followed by the Markit PMI data for the US. In contrast to the European readings, those are expected to rise and confirm the robust state of the US economy and could help fuel further gains on Wall Street.

 

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

 

Have a great weekend.

Tariffs? – So what!

China responded to the latest US tariffs with tariffs of their own of between 5-10% on $60 billion worth of American imports. Looking at markets, you’d think nothing had happened!

 

Dow at eight-month high

After an early wobble, the index powered 0.7% higher to close at its highest level since January, helped by gains in some counters that had been previously negatively affected by earlier tariffs. The S&P500 failed to hit a new record high above last month’s peak while the Nasdaq held a healthy bounce of the 55-day moving average. The US dollar, measured against a basket of six currencies, rose 0.15% as US 10-year yields climbed to their highest since May.

 

 

Across Asian equity markets, sentiment was not quite so bullish, though most indices did trade in the black. The Nikkei edged a 0.03% gain while China shares rose 0.77% while the Hang Seng gained 0.68% by lunchtime. The US dollar maintained its bid bias with USD/JPY hitting its highest in two months as US yields held their higher levels.

 

S&P sees greater impact for US

On the latest tariffs, ratings agency S&P commented that it saw that the aggregate impact of both tariff and confidence effects would be more pronounced on the US economy than China’s. A full-blown trade war, with tariffs of 25% on all non-fuel goods, is seen shaving 1.2% off the US’ GDP over 2019-2021 with the loss for China about 1%. Their major concern is that China may start responding with non-tariff actions, once tariff possibilities are exhausted.

Possibly in a hint of things to come, recent data released by the US Treasury Department showed that China’s holdings of US Treasuries fell to a six-month low of $1.17 trillion in July, down from $1.18 trillion in June. While some say the selling may have been to fund USD/yuan sales to support the local currency, others fear it may be a partly in response to the US imposing tariffs on Chinese goods.

China Holdings of US Treasuries

Source: US Treasury Department; Oanda

 

 

Bank of Japan: No talk, no action

The Bank of Japan left its benchmark interest rate unchanged at 0.10%, as expected. It also maintained its 10-year JGB yield curve control at about 0%, also as had been expected. The vote on yield curve control was 7-2, with members Harada and Kataoka dissenting. The central bank also maintained its annual pace of JGB holdings at 80 trillion yen and annual ETF purchases at six trillion yen. Given the non-event style of the decision, USD/JPY barely moved afterwards, stuck at 112.36 and holding close to its two-month high.

 

 

Pound lifted by May’s Brexit chatter

On the eve of an EU summit in Austria, UK PM Theresa May spoke with the UK’s Express newspaper saying the withdrawal agreement is virtually agreed and would be the right plan for the UK and deliver a good deal for the EU. She also warned that calls for a second referendum risks shattering trust in the government. Talking about the rumored plot against her leadership from within her own party, she insisted she plans to stay in Downing Street to deliver a program to transform Britain long after next year’s Brexit deadline.

 

GBP/USD Daily Chart

Source: Oanda fxTrade

 

GBP/USD touched an eight-week high of 1.3176 early in today’s session and is testing the 100-day moving average at 1.3165. The pair has not closed above this moving average since April 26. GBP/USD is currently sitting at 1.3155.

 

UK prices in the spotlight

We get to see the whole range of UK price indices for August today. Producer output prices are expected to rise 0.2% from July, while consumer prices are seen jumping more, with a 0.5% increase over the previous month. Retail prices are also expected to rise from July, with a 0.6% gain forecast. Euro-zone construction output for July completes the European session. The only US data today are housing starts and building permits for August, along with the Q2 current account balance. That is expected to show an improvement in the deficit to $103.5 billion from $124.1 billion. The day is rounded off with a late speech by ECB’s Draghi.

 

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

 

Source: MarketPulse

Live FX analysis – 18 September 2018 (Video)

Senior Market Analyst Craig Erlam discusses the key market themes from the summer – most notably US tariffs and Brexit – and the events to watch out for this week.

Craig also gives his live analysis on EURUSD (17:48), GBPUSD (21:36), EURGBP (24:42), AUDUSD (25:44), USDCAD (28:33), GBPCAD (31:02), NZDUSD (32:41), USDJPY (34:16), GBPJPY (35:25) and EURJPY (36:31).

Japan Q2 GDP Grow Faster Than Expected as UK GDP Meets Expectations

Earlier today, the Japanese statistics office released the preliminary numbers for the second quarter GDP. The numbers showed that the economy rose by an annualized rate of 1.9% in the second quarter. This was higher than the expected 1.4% annualized rate and the Q1 contraction of 0.9%. The growth in the GDP in the quarter was mostly because of increased capital expenditure which rose by 1.3%. This was higher than the expected growth of 0.6%. Another reason for the growth was the increase in private consumption, which rose by 0.7% in the quarter, higher than the expected 0.2%.

The growth was hampered by external demand which contracted by minus 0.1%. Traders were expecting it to remain unchanged at 0.1%. This was a reflection of the challenging trade environment. During the quarter, there was a disruption in trade as the US initiated tariffs on steel and aluminium. In addition to the GDP numbers, the country released the PPI numbers which beat analysts’ forecasts. The PPI in July rose by 3.1%, which was higher than the expected 2.9%.

The expansion in the Japanese economy was released a week after the United States released its GDP numbers for the second quarter. The numbers for the United States rose by 4.1%, which was the fastest increase since 2014 and was a reflection of the positive impacts of the tax reform and the spending package released earlier this year. Traders are now waiting for more data to predict whether the economy will continue moving higher in the third quarter.

The Office of National Statistics (ONS) released the first preliminary numbers for the UK GDP. The numbers showed that the economy rose slightly in the second quarter. On an annualized basis, the economy rose by 1.3%, which was expected. In the first quarter, the economy had expanded by 1.3%. On a quarterly basis, the economy rose by 0.4%.

On another positive note, the manufacturing production in June rose by 0.4%, which was higher than the expected 0.3%. It was nonetheless lower than the 0.6% gain in May. On an annual basis, the manufacturing production rose by 1.5%, which was higher than the expected 1.5%. The industrial production too of 1.1% growth was better than the expected 0.7% gain. The trade balance in June of 11.38 billion pounds was better than the expected 12.05 billion pounds and the balance in May of 12.52 billion pounds.

After the data was released, the pound remained lower than the dollar as traders continued to worry about the possibility of a no-Brexit deal. Such a deal will be a game changer for the UK economy whose biggest trading partner is the European Union.

Later today, we will get the CPI data from the United States. Traders expect the CPI to have risen by an annual rate of 3.0% while the core CPI is expected to rise by 1.3%. Still, the EUR/USD pair is lower as traders get concerned about Europe’s exposure to the Turkish Lira.

The post Japan Q2 GDP Grow Faster Than Expected as UK GDP Meets Expectations appeared first on Forex.Info.

USD/JPY consolidates gains made on tariff war hopes

Are seats at the negotiating table being dusted off?

News breaking late yesterday that the US and China have plans once again to sit at the negotiating table and hopefully diffuse an escalating trade war helped risk sentiment. The announcement comes ahead of the next scheduled introduction of tariffs on $16b of Chinese imports, possibly this week. However, initial comments from US officials caution that a definite timetable, topics for discussion and the format of the talks have not been finalized. Taking some of the shine off this positive news were headlines suggesting the Trump administration is considering increasing the tariff rate on the next $200b worth of Chinese goods from 10% to 25%.

Trade war breakthrough?

The initial reaction in NY currency markets was for the JPY to weaken amid a greater appetite for risk, with USD/JPY hitting an eleven-day high of 111.95. Wall Street was already on a roll as Facebook results beat estimate and the trade news helped the industrial sector. The Asian session struggled to maintain this momentum and USD/JPY traded in a tight range, managing to eke out gains of just 0.01%. Equity markets across the region traded in the red.

USD/JPY Daily Chart

Source: Oanda fxTrade

Mixed signals from PMI readings so far

The start of the month sees the release of a slew of PMI readings from across the globe. Contrasting with the slightly weaker numbers out of China released yesterday, Japan’s PMI jumped to 52.3 in July from 51.6 at the provisional reading. China’s Caixin PMI reading, which focuses more on small to medium enterprises, echoed the sentiment of the official release with a slide to 50.8, equaling the low in November last year. More worrying was the new export orders component which contracted at the fastest pace in two years, no doubt weighed down by trade war concerns.

Still to come we have Italy, France, Germany and the combined Eurozone along with the UK and followed by the US later in the day.

See the MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Two central bank meetings in the headlights

While there are no expectations for any adjustments to Fed policy at today’s FOMC meeting, markets will be cautious of any shift in the tone of June’s statement which focused on accelerating economic growth, strong business investment and rising inflation. While there is no press conference scheduled, it would be remiss to simply just ignore this event.

More action is likely from the Reserve Bank of India which is widely expected to increase its benchmark repurchase rate by 25 bps to 6.5%, a two-year high. Rising core inflation on the back of higher oil prices and a week local currency would be the justification for the hike following on from June’s surprise move. The rupee has fallen as much at 8.8% versus the US dollar this year and is among Asia’s worst performing currencies.

USD/INR Monthly Chart

Source: Oanda fxTrade

Source: MarketPulse

Dollar marks time in Asia as traders consider a busy data week

Traders scale back activity ahead of data/event rush

A busy data week culminating in the monthly US jobs report and approaching month-end all conspired to keep traders in Asia sidelined and currencies range-bound at the start of the week. Traders were also mulling the aftermath of US GDP data release on Friday which showed the US economy growing 4.1% on an annualized basis in Q2. The US dollar struggled to get any kind of lift from the strong data as analysts and commentators immediately looked towards Q3 numbers, which are expected to be nowhere near as buoyant. That didn’t stop US Treasury Secretary Mnuchin from saying that he believed the US economy could sustain growth of at least 3% for the next 4-5 years.

Dollar Mixed Ahead of Busy Week in the Market

Japan retail spending ticks up as BOJ meets

The only data releases in Asia were second-tier. Retail trade in Japan rose 1.8% y/y, above economists’ forecasts of a 1.6% gain while large retailers’ sales posted positive growth for the first time in three months. USD/JPY was mostly steady, rising 0.09% while EUR/JPY gained 0.04%. AUD/USD was mostly sidelined, holding close to the 0.74 handle with a slide of 0.13% to 0.7391.

Gold continues to hover near one-year lows as latest data from Chicago shows speculative investors reduced their net long gold positions in the week to July 24. Oil prices extended Friday’s slide, easing down to $69.50

See the MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Markets on Central Bank watch

The Bank of Japan starts its two-day meeting today, the first of many to follow during the week. There is mounting speculation that the BOJ will discuss an adjustment to its JGB target rates and possibly scaling back its investments in ETFs that track the Nikkei. When it comes to old-fashioned monetary policy, analysts are unanimous in their view that there will be no change in rates, with the possibility of allowing the 10-year JGB yield to move above zero percent, which is its current target level. The 10-year yield is trading at 0.11% today and notably has held above 0% since September last year.

The Bank of England is seen hiking rates by 25 bps to 0.75% even though inflation appears to be on a downward tack and data fails to be convincing while the FOMC is not expected to result in any rate changes, more a confirmation that a September hike is still very much on the cards. The Reserve Bank of India is also expected to increase its benchmark rate while Brazil’s central bank is seen standing pat.

Japan 10-Year JGB Yield Chart

Source: Bloomberg (https://www.bloomberg.com/quote/GJGB10:IND)

Yen buoyed as inflation tops estimates

Tokyo prices rise most in four months

This morning’s release of consumer prices in Tokyo saw the biggest rise in four months. Prices rose 0.9% y/y, beating economists’ estimates of a mere 0.5% increase by a large margin. Prices in June were 0.6% higher than a year earlier. This contrasts with the national reading for June which showed a below-forecast 0.7% gain. Excluding food and energy, the price rise was a more modest 0.5% y/y.

NOTE: Japan releases two sets of inflation data. A national one, which has a lag of one month, and one for just Tokyo, which is more current.

In the currency markets, the yen was given a little boost across the board post-data though there was perhaps more reaction in the bond markets. The 10-year JGB yield touched 0.1% for the second straight session. Last Monday, the Bank of Japan announced its first special fixed rate bond auction since February, offering to buy 10-year bonds at 0.11%. The Bank announced unchanged tenors and amounts at its last daily bond auction before the rate meeting on Monday/Tuesday next week.

USD/JPY Daily Chart

Source: Oanda fxTrade

Bank of Japan to change QQE plan?

Also fueling the rise in Japan yields is speculation that the Bank will make changes to its bond yield targets at next week’s meeting. Observers suggest that quite often when it comes to the Bank of Japan, there is no smoke without fire. Some suspect that they may be testing the waters for such a move later in the year. Analysts reckon that any shift higher in yields, or a steepening of the yield curve, would be beneficial for Japanese banks and financial institutions.

10-Year JGB Yield Chart

Source: Bloomberg.com

ECB sticks to its plans

At yesterday’s rate meeting, the ECB maintained its stance to end bond purchases by the end of the year and pledged to keep interest rates static at least through the summer of 2019 before considering a tightening bias. The EUR did slide versus the dollar after the press conference, though this could also be attributed to gains in the US dollar ahead of today’s release of US Q2 GDP data.

Dollar Rebounds in Anticipation of Q2 GDP Release

US Q2 GDP data on tap

The main event on today’s data calendar will undoubtedly be the release of US Q2 GDP data. Estimates suggest growth accelerated to 2.3% q/q from +2.2% in Q1, while the annualized figure is seen jumping to 4.0% from 2.0%. Apparently, a top Trump official has been telling Republicans to expect a “blockbuster GDP number” while Trump himself has commented he’d be happy with a number 4 in front. Other data releases include German import prices and US personal consumption expenditure prices for Q2.

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