US President Trump Warns China on Trade

U.S. President Donald Trump warned on Thursday there was much more he could do that would hurt China’s economy further, showing no signs of backing off an escalating trade war with Beijing.

President Donald Trump said Tuesday that he does not like the Federal Reserve’s decision to continue to hike interest rates.

He also said that the United States economy does not have an inflation problem and that the central bank is moving too quickly in trying to curb price increases.



Trump imposed tariffs on nearly $200 billion of Chinese imports last month and then threatened more levies if China retaliated. China then hit back with tariffs on about $60 billion of U.S. imports.

“It’s had a big impact,” Trump said in a Fox News interview. “Their economy has gone down very substantially and I have a lot more to do if I want to do it.

“I don’t want to do it, but they have to come to the table.”

However, Trump said the Chinese want to negotiate but he does not believe they are ready and he told them so. He blamed previous U.S. presidents for allowing China to pursue unfair trade practices and said he had to tell Beijing, “It’s over.”

Reuters

US Stock Market Rebounds After Lower Inflation

The S&P 500 and the Nasdaq turned positive on Thursday as Treasury yields headed lower after data showed consumer prices rose less than expected in September, indicating inflation pressures were easing.



The Consumer Price Index (CPI) increased 0.1 percent last month. The so-called core CPI, which excludes volatile food and energy components, also edged up 0.1 percent. Economists had forecast both the readings to climb 0.2 percent.

U.S. Treasury yields extended their fall after the data, which dented expectations of a more aggressive pace of interest rate hikes by the Federal Reserve.

via Reuters

Bitcoin Vulnerable to IMF Comments Falls

Bitcoin’s role as a “safe haven” asset in turbulent times is looking more unlikely.

As the U.S. stock market saw its biggest drop since February on Wednesday, the largest digital currency dropped 6 percent along with it. Bitcoin, sometimes referred to as “digital gold,” and other top cryptocurrencies wiped out $13 billion of value in a matter of hours, according to data from CoinMarketCap.com.

Other top cryptocurrencies followed bitcoin’s lead, with XRP and ethereum both tumbling more than 10 percent. The downward moves came after the International Monetary Fund warned that cryptocurrencies “could create new vulnerabilities in the international financial system.”




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Bitcoin proponents have billed it as a store of value, or “digital gold,” and a possible replacement for traditional currencies.

This week’s market plunge, and this year’s global turmoil, should have made ideal conditions for digital currencies to prove that. The Dow Jones Industrial Average closed more than 800 points lower Wednesday, its biggest loss since February, hurt by quickly rising interest rates and a rout in tech stocks.

While U.S. stock market has otherwise fared pretty well this year, government-backed currencies were dragged down by ongoing Brexit concerns in 2018, and there were growing trade tensions between the U.S., China and European Union.

via CNBC

USD/CAD punches above 1.30 as Canadian dollar sags, CPI next

The Canadian dollar has edged lower in the Thursday session. Currently, USD/CAD is trading at 1.3042, down 0.19% on the day. On the release front, Canada releases the New Housing Price Index, which is expected to post a gain of 0.1% for a third straight month. In the U.S., CPI and Core CPI are both expected to post gains of 0.2%. As well, unemployment claims are forecast to remain pegged at 207 thousand. On Friday, the U.S releases a key consumer confidence gauge, UoM Consumer Sentiment.

With bonds yields continuing to rise, investors have reacted negatively and stock markets continue to spin lower. With risk appetite taking a beating, investors gave a thumbs down to minor currencies like the Canadian dollar, sending USD/CAD above the symbolic 1.30 level on Wednesday. The markets will be keeping a close eye on U.S consumer inflation data – strong numbers would likely increase the likelihood of a December rate hike in the U.S and further boost the U.S dollar.

With the U.S economy continuing to post strong numbers, the Federal Reserve is on track to raise rates in December. This would be the fourth rate hike in 2018, and the markets are expecting three more hikes in 2019. Not surprisingly, this has put pressure on the Bank of Canada to raise rates as well. The Canadian economy is in good shape, but not nearly as strong as its southern neighbor. The Bank of Canada holds its next policy meeting on October 24, and the strength of key Canadian releases will be a major factor as to whether policymakers raise rates.

High hopes give way to steeper slopes

European open – Trump attacks Fed as markets tank

USD/CAD Fundamentals

Thursday (October 11)

  • 8:30 Canadian NHPI. Estimate 0.1%
  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 207K
  • 10:30 US Natural Gas Storage. Estimate 87B
  • 11:00 US Crude Oil Inventories. Estimate 2.3M
  • 13:01 US 30-year Bond Auction
  • Tentative – US Treasury Currency Report

Friday (October 12)

  • 8:30 US Import Prices. Estimate 0.3%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.4
  • 10:00 US Preliminary UoM Inflation Expectations
  • 12:30 US FOMC Member Raphael Bostic Speaks
  • 12th-18th US Federal Budget Balance. Estimate 71.0B
  • 10:30 US FOMC Member Randal Quarles Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Thursday, October 11, 2018

USD/CAD, October 11 at 7:35 DST

Open: 1.3068 High: 1.3069 Low: 1.3033 Close: 1.3042

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2733 12831 1.2970 1.3067 1.3198 1.3292

USD/CAD was mostly flat in the Asian session. In European trade, the pair ticked lower but has recovered these losses and moved higher

  • 1.2831 is providing support
  • 1.2970 is a weak resistance line
  • Current range: 1.2831 to 1.2970

Further levels in both directions:

  • Below: 1.2831, 1.2733 and 1.2649
  • Above: 1.2970, 1.3067, 1.3198 and 1.3292

EUR/USD – Euro hits 1-week high, US consumer inflation next

EUR/USD has edged higher in the Thursday session. Currently, the pair is trading at 1.1546, up 0.23% on the day. On the release front, French Final CPI declined 0.2%, matching the forecast. The ECB will release the accounts of the August policy meeting. In the U.S, the key indicators are CPI reports. We’ll also get a look at unemployment claims and the Treasury currency report. On Friday, Germany releases Final CPI and the eurozone publishes Industrial Production. The U.S releases UoM Consumer Sentiment.

With bonds yields continuing to rise, investors have reacted negatively and stock markets continue to spin lower. The U.S dollar often is the winner in times of crisis, providing a safe haven for nervous investors. However, the euro has weathered this latest crisis, holding its own against the greenback this week. On Thursday, German 10-year bonds fetched 0.55%, marking a 6-month high. The markets will be keeping a close eye on U.S consumer inflation data – strong numbers would likely increase the likelihood of a December rate hike in the U.S and reinvigorate the dollar.

Investors will be keeping a close eye on the ECB policy meeting accounts, looking for hints as to the timing of a rate hike next year. The ECB has stated that it will not raise rates before the “end of the summer”, which many analysts have interpreted as September 2019. However, that time period is not etched in stone, and the ECB could opt to raise rates earlier, if warranted by economic conditions. Besides inflation, ECB policymakers will have to weigh other factors such as the U.S-China trade war when deciding when to raise interest rates.

High hopes give way to steeper slopes

European open – Trump attacks Fed as markets tank

EUR/USD Fundamentals

Thursday (October 11)

  • 2:45 French Final CPI. Estimate -0.2%. Actual -0.2%
  • 7:30 ECB Monetary Policy Meeting Accounts
  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 207K
  • 10:30 US Natural Gas Storage. Estimate 87B
  • 11:00 US Crude Oil Inventories. Estimate 2.3M
  • 13:01 US 30-year Bond Auction
  • Tentative – US Treasury Currency Report

Friday (October 12)

  • 2:00 German Final CPI. Estimate 0.4%
  • 5:00 Eurozone Industrial Production. Estimate 0.4%
  • 8:30 US Import Prices. Estimate 0.3%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.4
  • 10:00 US Preliminary UoM Inflation Expectations
  • 12:30 US FOMC Member Raphael Bostic Speaks
  • 12th-18th US Federal Budget Balance. Estimate 71.0B
  • 10:30 US FOMC Member Randal Quarles Speaks

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, October 11, 2018

EUR/USD for October 11 at 5:30 DST

Open: 1.1520 High: 1.1573 Low: 1.1520 Close: 1.1546

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1190 1.1300 1.1434 1.1553 1.1637 1.1718

EUR/USD posted small gains in the Asian session but given up these gains in European trade

  • 1.1434 is providing support
  • 1.1553 was tested earlier in resistance and could break in the Thursday session

Further levels in both directions:

  • Below: 1.1434, 1.1300 and 1.1190
  • Above: 1.1553, 1.1637, 1.1718 and 1.1840
  • Current range: 1.1434 to 1.1553

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

Dollar Loses Momentum as Stocks Drop Awaiting Inflation Data

The EUR/USD rose 0.42 percent on Wednesday. The single currency is trading at 1.1539. The surge was due to positive Brexit comments but was limited as Italian budget drama continues. As the deadline for a final divorce agreement between the UK and the EU nears there has been a lot of talk of getting closer to an amicable split. The market is still awaiting any definite details that could send the euro even higher.



The US dollar is taking a breather even as US yields continue to climb. Inflation data in the US is still supportive of more rate hikes. The PPI release today met the forecast at 0.2 percent after last month’s loss of 0.1 percent. Tomorrow’s CPI datapoint will be crucial for the US dollar as fundamentals continue to push the greenback higher.

Yesterday US President Donald Trump once again spoke against more Fed rate hikes. The President echoes the view of many (including some Fed members) that inflation is not a problem and is urging the Fed to slow down its planned rate hikes. The Fed has hiked 3 times this year and is on track to add another 25 basis points lift in December.

Loonie Lower as USMCA High Fades

The Canadian dollar is lower on Wednesday. The loonie is lost 0.38 percent versus the USD as lower oil prices and higher US yields put downward pressure on the currency.

The IMF did not cut the growth forecast for Canada, in fact mentioned that the USMCA might boost growth. The loonie has been riding the trade agreement wave, but the market is now focusing on fundamentals.


usdcad Canadian dollar graph, October 10, 2018

Returning form the Thanksgiving holiday CAD traders have seen housing starts and building permits come in lower than expectations. The Bank of Canada (BoC) could hike rates in October, but economic data has to prove that the economy can take it.

Although the USMCA is a big positive for the loonie, the agreement is not final as politicians in all member countries need to ratify the agreement and with midterms in the US and a looming federal election in Canada next year there could be some obstacles ahead.

Mexican Peso Stays Close to 19

The Mexican peso had a volatile day as the US PPI validated the Fed’s rate hike path. The Mexican central bank kept rates unchanged in October and the market is anticipating a rate hike in December the U.S. Federal Reserve. Interest rate divergence put some pressure on the peso, but after reaching daily highs the US dollar ran out of steam. The pair is trading at 19.03 awaiting the release of US inflation on Thursday.



Gold Higher Awaiting US Inflation Data

Gold prices rose 0.14 percent on Wednesday. The US dollar is mixed against major pairs with the euro and sterling gaining on positive Brexit news. The dollar is losing some steam after the producer price index PPI met expectations at 0.2 percent. Investors will be on the lookout for the Consumer Price Index (CPI) to be released on Thursday at 8:30 am EDT.



A rate hike by the Fed was already priced in at the end of the September meeting and with high probabilities of a December rate lift its time to question the staying power of the US dollar.

Global growth has been downgraded and if trade disputes increase the pace of growth of the US looks to take a hit next year. Gold will fail to get any traction if US economic data continues its steady solid pace.

Oil Prices Await US Weekly Inventories

Oil prices dropped 2 percent on Wednesday. Energy prices are back to levels last seen on Monday after a global growth downgrade and the lower estimated impact of Hurricane Michael in the US.


West Texas Intermediate graph

The IMF downgraded its outlook for global growth on Tuesday. Growth is now estimated at 3.7 percent this year and next, from a previous 3.9 percent made last summer. Trade concerns were the biggest factor behind the downgrade.

Weather disruptions will continue to keep the black stuff bid as the sanctions against Iranian exports are set to begin. Buyers have already limited their purchases of Iranian crude and decisions like that of Sinopec to halve its purchases of oil loadings signal a more stringent enforcement from the US.


West Texas Intermediate graph

Hurricane Michael is not expected to affect Gulf of Mexico production beyond workers who were evacuated return to work after the storm has passed. The release of API inventories and weekly US crude data by the Energy Information Administration (EIA) will weigh on prices later today and tomorrow.

US weekly energy stocks are expected to increase by 2.3 million barrels and could put further downward pressure on prices. Lack of pipelines are a concern as Permian Basin oil and natural gas supply will be constrained. The bottleneck created by higher supply into an existing pipeline capacity will be sorted next year, but in the meantime it won’t be a big of a factor.
Market events to watch this week:

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

Loonie Lower as USMCA High Fades

The Canadian dollar is lower on Wednesday. The loonie is lost 0.38 percent versus the USD as lower oil prices and higher US yields put downward pressure on the currency.

The IMF did not cut the growth forecast for Canada, in fact mentioned that the USMCA might boost growth. The loonie has been riding the trade agreement wave, but the market is now focusing on fundamentals.


usdcad Canadian dollar graph, October 10, 2018

Returning form the Thanksgiving holiday CAD traders have seen housing starts and building permits come in lower than expectations. The Bank of Canada (BoC) could hike rates in October, but economic data has to prove that the economy can take it.

Although the USMCA is a big positive for the loonie, the agreement is not final as politicians in all member countries need to ratify the agreement and with midterms in the US and a looming federal election in Canada next year there could be some obstacles ahead.

GBP/USD – British climbs to 2-week high on strong GDP

GBP/USD has recorded considerable gains on Wednesday, continuing the upward movement seen on Tuesday. In the North American session, the pair is trading at 1.3200, up 0.42% on the day. On the release front, British data disappointed. GDP grew by 0.7%. In the U.S, PPI and Core PPI both gained 0.2%, matching the estimate. These inflation readings were the strongest gains since June. On Thursday, the U.S will release CPI reports and unemployment claims.

British numbers were mixed on Wednesday, but the pound has pushed higher, breaking above the 1.32 level for the first time since September 26. The economy expanded 0.7% for the three months to August, compared to the three months to May. This was music to the ears of investors who are constantly concerned about the negative ramifications of Brexit on the economy. The news was not as good from manufacturing production, which posted a second consecutive loss of 0.2%, short of the estimate of 0.1%.

The mood seems more positive in London and Brussels, as there are reports of progress in the Brexit negotiations. With Britain set to sail away from the EU in March 2019, both sides are sounding more conciliatory, after months of bickering. Still, there are plenty of issues to solve, with the issue of the Irish border one of the thorniest problems. Prime Minister May’s government depends on the tiny DUP party for its survival. The leaders of the DUP, Arlene Foster, met with the EU’s chief negotiator, Michel Barnier on Tuesday. Foster is adamantly opposed to any regulatory barriers between Northern Ireland and the rest of the U.K. However, the EU wants to see Northern Ireland remain in a customs union with the continent, which would require some type of border check between Northern Ireland and the rest of the U.K. Foster has gone so far as to threaten to vote against the budget later this month if May agrees to the EU demands.

Will Britain and the European Union reach an agreement over Brexit? Despite months of gloom and fears of a hard Brexit, there is renewed optimism in London and Brussels that a deal can be reached before the March 2019 deadline. There are reports that the sides have made progress on a range of issues, including the Irish border and continued EU access to London’s clearinghouses. EU leaders will hold a crucial meeting on October 17, with Brexit one of the key items on the agenda. If there are tangible signs of progress on Brexit ahead of the summit, the pound could move higher.

European open – Brexit reports provide early lift

Dollar gains pause, but probably not for long

European update – GBP/USD pares gains after data

GBP/USD Fundamentals

Wednesday (October 10)

  • 4:30 British GDP. Estimate 0.1%. Actual 0.0%
  • 4:30 British Manufacturing Production. Estimate +0.1%. Actual -0.2%
  • 4:30 British Construction Output. Estimate -0.4%. Actual -0.7%
  • 4:30 British Goods Trade Balance. Estimate -10.9B. Actual -11.2B
  • 4:30 British Index of Services. Estimate 0.6%. Actual 0.5%
  • 4:30 British Industrial Production. Estimate 0.1%. Actual 0.2%
  • 5:00 BOE Chief Economist Andy Haldane Speaks
  • 8:30 US PPI. Estimate 0.2%. Actual 0.2%
  • 9:30 British NIESR GDP Estimate. Actual 0.7%
  • 8:30 US Core PPI. Estimate 0.2%. Actual 0.2%
  • 10:00 US Final Wholesale Inventories. Estimate 0.8%. Actual 0.1%
  • 13:01 US 10-year Bond Auction
  • Tentative – US Treasury Currency Report
  • 18:00 US FOMC Raphael Bostic Speaks
  • 19:01 British RICS House Price Balance. Estimate 2%

Thursday (October 11)

  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 207K

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, October 10, 2018

GBP/USD October 10 at 11:50 DST

Open: 1.3144 High: 1.3210 Low: 1.3134 Close: 1.3200

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2852 1.2966 1.3173 1.3301 1.3447 1.3527

GBP/USD ticked higher in the Asian session. In the European session, the pair edged lower but then recovered. The pair continues to post gains in North American trade

  • 1.3173 is providing support
  • 1.3301 is the next resistance line
  • Current range: 1.3173 to 1.3301

Further levels in both directions:

  • Below: 1.3173, 1.2966, 1.2852 and 1.2723
  • Above: 1.3301, 1.3447 and 1.3527

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Canada: Building permits, August 2018

Canadian municipalities issued $8.1 billion worth of building permits in August, up 0.4% from July. Strength in the non-residential sector drove the increase, while the residential sector declined for the third consecutive month.

Non-residential sector: High value projects drive the increase

In the non-residential sector, $3.2 billion worth of permits were issued in August, up 8.8% from the previous month. Both the institutional (+25.8%) and commercial (+8.9%) components contributed to the gain, which was largely the result of the issuance of permits for a new hospital in Ontario and new office buildings in British Columbia.

Meanwhile, the value of industrial permits fell 5.9% in August to $677 million. This followed a 13.4% gain in July, as multiple permits were issued that month for transportation terminals and manufacturing structures in Ontario and Alberta.

Residential sector: Third consecutive month of declines for both components

Municipalities issued $5.0 billion worth of residential permits in August, down 4.4% from July and marking the third consecutive monthly decline for the sector. Five of the six provinces that posted decreases had lower intentions for both single and multi-family construction.

The value of permits for single-family dwellings was down 5.2% to $2.2 billion, maintaining the general downward trend that began in January 2018. While eight provinces posted decreases in the month, Ontario and British Columbia contributed the most to the decline.

In the multi-family dwelling component, the value of permits fell 3.8% to $2.7 billion. Despite the monthly decline, the year-to-date value was $3.5 billion higher than the same time last year. Multi-family dwellings have represented over 70% of the total units for six of eight months so far this year. There are no previous years on record where multi-units exceeded that level.

Provinces and census metropolitan areas: British Columbia reaches another record high

In August, only three provinces reported gains, led by a record high in British Columbia. The largest decline occurred in Ontario, due to lower construction intentions in the residential sector.

The value of permits in British Columbia reached a record high of $1.8 billion in August, 12.8% above the previous record set in March 2018. In the non-residential sector, the value of permits passed the $600-million mark for the first time. Large projects for office buildings in the Vancouver census metropolitan area (CMA) were largely responsible for the growth.

In the CMA of Vancouver, the value of permits rose 66.4% to $1.4 billion in August, accounting for three-quarters of the value in British Columbia. Although most of the increase came from the City of Vancouver, the City of Burnaby issued over $250 million worth of permits for apartment buildings, bringing the total to over $800 million for the year.

In Ontario, all components declined in August, except institutional buildings. The value of permits in the residential sector dropped 13.9%. This followed several strong months in the multi-family dwelling component.

At the CMA level, the value of residential permits in Ottawa fell 60.9% in August, following a 59.9% gain in July. This was due to the implementation of higher development fees in the city, as developers applied for permits ahead of August’s fee increase.

StatsCanada