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• Trump reignites US-China trade war concerns and prompts some fresh selling.
• Reviving USD demand/uptick in the US bond yields add to the downward pressure.
• Traders now eye US macro data/Powell’s speech for some fresh impetus.
The AUD/USD pair came under some renewed selling pressure on Friday and has now reversed all of its gains recorded in the previous session.
The pair continued with its struggled to make it through the 0.7580 supply zone, with lingering US-China trade war fears to weigh on the China-proxy Australian Dollar. The US President Donald Trump raised the spectre of high US tariffs on imported cars and reignited fears of a trade war.
Adding to this, some renewed US Dollar buying interest, supported by a modest uptick in the US Treasury bond yields exerted some additional downward pressure on higher-yielding currencies - like the Aussie and further collaborated to the pair's softer tone.
Meanwhile, the prevalent negative trading sentiment around commodity space, especially copper, did little to revive demand for the commodity-linked Australian Dollar and assist the pair to build on overnight gains, led by broad-based USD weakness.
Moving ahead, today's important release of the US durable goods orders data and a scheduled speech by the Fed Chair Jerome Powell would now be looked upon for some meaningful impetus on the last trading day of the week.
Technical levels to watch
Immediate support is pegged near the 0.7540 level, below which the pair is likely to accelerate the slide back towards retesting the key 0.75 psychological mark. On the upside, sustained move beyond 0.7580 immediate resistance now seems to lift the pair further beyond the 0.7600 handle toward challenging its next major hurdle near the 0.7640-50 supply zone.
The pair continued with its struggled to make it through the 0.7580 supply zone, with lingering US-China trade war fears to weigh on the China-proxy Australian Dollar. The US President Donald Trump raised the spectre of high US tariffs on...READ MORE
On North Korea willingness to resolve issues with the US, risk-off mood eased somewhat in Asia on the final trading of the week, lifting the sentiment around the higher-yielding assets such as equities and Treasury yields. However, markets remained on the edge since Trump canceled the June North Korea Summit, keeping the downside capped in the safe-havens Yen and gold.
Among the Asia-pac currencies, USD/JPY rebounded from two-week lows, but upside stalled near 109.75 levels. The Antipodeans traded on the back foot amid rife geopolitical tensions and broad-based US dollar strength while a lack of fresh economic news also left most majors at mercy of the risk trends and USD dynamics.
Main topics in Asia
North Korea willing to meet with the U.S. at any time
Wires are crossing that North Korea are willing to meet with the U.S. at any time …
Canada PM pins new US tariff talk on NAFTA - Reuters
As reported by Reuters, Canada's Prime Minister, Justin Trudeau, accused the Trump administration of "flimsy logic" regarding a new investigation into placing tariffs on foreign vehicles imported into the US, and suggested the move is specifically linked to NAFTA talks.
Fed will raise rates three more times this year - Reuters poll
Federal Reserve will hike rates three more times this year, pushing the interest rates to 2.25 percent - 2.5 percent by the year-end, according to latest Reuters poll.
Mexico will not be pressured into NAFTA renegotiation but will make counter-offer - Reuters
As reported by Reuters, Mexico is staunchly refusing to cave to US pressure to conclude the stalled-out NAFTA renegotiations.
US Commerce Secretary Ross to visit China June 2-4 to discuss trade issues - Xinhua
Xinhua, China’s state-run news agency, is out with the latest headline, citing that the US Commerce Secretary Wilbur Ross is scheduled to visit China from June 2nd to 4th to discuss the impending trade issues.
Gold clocks 10-day high above $1300
Currently, gold (XU/USD) is trading at $1,302/Oz, having clocked a ten-day high of $1,306 in the overnight trade. The yellow metal picked up a bid yesterday, possibly due to renewed geopolitical tensions and the resulting risk aversion in the equity markets.
Key Focus ahead
Today’s EUR calendar offers the German IFO business climate and the second estimate of UK Q1 GDP, which will be reported at 0830 GMT alongside the release of the prelim business investment and other minority reports. Meanwhile, the ECOFIN meetings will go on all through the day. These meetings are usually held in Brussels and attended by Finance Ministers from EU member states.
Meanwhile, the Reserve Bank of Australia (RBA) Assistant Governor Bullock will speak at 1200 GMT at De Nederlandsche Bank's Housing Market seminar, in Amsterdam. His speech will be followed by the key US durable goods and Revised UoM Consumer Sentiment data.
A bevy of central bank speakers is lined up to make their respective speeches in the NA session, which will wrap up an eventful macro week.
1315 GMT – ECB Coeure’s speech
1320 GMT – Fed Chair Powell’s speech
1320 GMT – BOE Governor Carney’s speech
1545 GMT – Fed Kaplan speech
1545 GMT – Fed Bostic speech
1545 GMT – Fed Evans speech
1920 GMT – ECB Weidmann’s speech
EUR/USD: Bullish tinge, but hard to be optimistic longer term
The pair could find acceptance above 1.1750 today and may rise even further if the US durable goods figure, scheduled for release at 12:30 GMT, disappoints expectations.
GBP/USD continues to pout, buyers remain silenced ahead of the UK's GDP figures
The Sterling has been hammered by drooping economic figures that saw the Bank of England forced to walk back an expected rate hike in May, and today's quarterly GDP figures will see traders hoping for some good news.
UK: Recent activity data point to Q1 GDP growth at 0.1% q/q - Barclays
The Barclays Research Team offers a sneak peek at what to expect from today’s UK GDP second estimate for the first quarter, slated for release at 0830 GMT.
Key US data previews - Nomura
Analysts at Nomura previewed the forthcoming key US data for the end of the week.
Heading for the Friday finish line with a long weekend looming in both US and UK, we should expect some position consolidation.
Today’s EUR calendar offers the German IFO business climate and the second estimate of UK Q1 GDP, which will be reported at 0830 GMT alongside the release of the prelim business investment and...READ MORE
The dollar fell against a basket of currencies on Thursday and hit a two-week low against the Japanese yen, after U.S. President Donald Trump called off a summit meeting with North Korean leader Kim Jong Un and as traders booked profits following the greenback’s recent rally.
Trump called off the planned June 12 summit meeting with the North Korean leader even after North Korea followed through on a pledge to blow up tunnels at its nuclear test site.
The yen, which tends to rise in times of market turbulence, hit to a two-week high against the greenback. The dollar was down 0.81 percent at 109.18 yen. The South Korean won slipped 0.6 percent against the dollar.
The dollar index, which measures the greenback against a basket of six other currencies, was down 0.25 percent at 93.766. Despite the weakness on Thursday, the index is up about 2 percent for the month, on pace for its second straight month of gains.
The dollar’s rally had already begun to lose steam following the release on Wednesday of the minutes of the Federal Reserve’s last policy meeting.
While most policymakers thought it likely another U.S. interest rate increase would be warranted - in line with market expectations - the minutes showed the Fed would tolerate inflation rising above its goal for a time.
The euro was up 0.26 percent at $1.1726. Still, it was set to be down for a sixth consecutive week against the dollar, its longest such streak since January 2015, hobbled by worries over a deepening economic slowdown in the currency bloc.
The leader of the far-right League, a partner in Italy’s planned coalition government, insisted that eurosceptic economist Paolo Savona should be named economy minister. This pressured the euro, limiting its gains for the day.
Sterling rose after upbeat British retail sales data, but eased off session highs due to persistent concerns over Brexit negotiations.
Turkey’s lira weakened more than 2 percent, retreating from hefty gains made on Wednesday when the central bank raised interest rates 300 basis points.
The dollar fell against a basket of currencies on Thursday and hit a two-week low against the Japanese yen, after U.S. President Donald Trump called off a summit meeting with North Korean leader Kim Jong Un and as traders booked profits following the greenback’s recent rally.READ MORE
Over the past few weeks the common currency unbeknown to many traders has saved their capital from being totally eroded!
How has it done that? Well, it has finally started to react to macroeconomic activity and provided some basis for traders to (mostly) make money. I had started to read the tell-tale suggestions on social media that traders could start to see value in cross currency trades in pairs that are not usually featured or traded, for example, AUD/CHF or CAD/JPY. There is of course, nothing wrong with those crosses and there are, or have been, several instances when there are specific reasons that trading them works. For example, when there are conflicting drivers for each leg of the pair and a move gets magnified.
Trading these crosses is not to be a panacea to not making money or a lull in the pair(s) that your strategy is designed to profit from. Patience is a part of anyone's strategy or should be.
That is why there is a smile on the trading face of those who trade the euro as a combination of Mario Draghi and vastly increased liquidity had kept the currency on a tight leash for what had seemed an eternity.
A close to six percent fall for the Euro in a month has created the volatility we desire but it has happened in a relatively controlled manner which also is a hit with our risk management strategies.
Don’t you just love Italian politics? Radical doesn’t even come close to describing them!
The new Government which is a coalition between Five Star (weren’t they an eighties pop group?) and League, a Party who make Nigel Farage appear to be Brussels biggest fan, is now coming close to being able to Govern after what seems like an eternity of haggling. While it is not quite a case of “the lunatics taking over the asylum”, other potentially radical politicians will be looking on with interest, particularly in Athens and Madrid.
In typical Italian fashion they cannot yet agree on who is radical enough to be Prime Minister.
But when they get that sorted out, they plan to ask the ECB to forgive two hundred and fifty billion euros of debt and then put forward proposals that will allow members to opt out of the single currency.
The recent fall in the value of the Euro has largely been in reaction to the dollar’s rally but should the anti-EU policies of Rome take hold and the threat of Italexit (I knew all along!) become a reality, then the effect of the threat of departure of a Eurozone member, as opposed to the UK who never appeared to be “Full Members”, could be devastating.
The almost continual wrangling over the value of Bitcoin, the incessant threat that Governments are “looking into” the uses of blockchain and cryptocurrencies and the constant setting up of interest groups and seminars are starting to dilute interest which is vital to the eventual success of something that needs positive publicity.
It is a double-edged sword to say that the whole idea of decentralized exchange of value that moves away from fiat currencies provides freedom and flexibility since it may need “official” acceptance linked to major institution like the IMF or World Bank to see it really blossom.
The next step beckons but it is more of a leap than a step, yet the question remains how will it happen? Revolution or evolution.
I read an article on Social Media the other day in which the writer, without making any suggestion of how it will happen made three obvious points; 1) Bitcoin needs wider acceptance, 2) The security surrounding cryptocurrency use, while understood by those involved, needs to be clearer and 3) pricing needs to be less volatile.
To me that is just a total waste of everyone's time. Highlighting what we all know to be the issues around acceptability doesn’t make them go away it just highlights a premise that the industry doesn’t know how to solve them.
The almost continual wrangling over the value of Bitcoin, the incessant threat that Governments are “looking into” the uses of blockchain and cryptocurrencies and the constant setting up of interest groups and seminars are starting to dilute interest which is vital to the eventual success of something that needs positive publicity.READ MORE
The euro rose off a six-month low on Thursday as the dollar faltered but concerns over an economic slowdown in Europe and political risks in Italy continued to act as a brake.
The euro is set to be down for a sixth consecutive week against the dollar — the longest weekly losing streak since January 2015 — hobbled by the surging U.S. currency and worries over a deepening economic slowdown in the currency bloc.
The single currency rose to $1.1746, off the low of $1.1676 hit on Wednesday, and was heading for its biggest daily gain in two weeks.
But that was largely because the recent dollar rally lost some momentum following dovish-looking minutes of the Federal Reserve’s last policy meeting and the threat by U.S. President Donald Trump to impose new tariffs on imported cars.
The euro’s gains were also capped by economic and political worries in Europe. The leader of the far-right League, a partner in Italy’s planned coalition government, insisted on Thursday that eurosceptic economist Paolo Savona should be named economy minister.
The euro has unwound all of its rally against the Swiss franc since the Italian elections as the prospect of a spendthrift coalition government taking shape in Rome unnerves investors.
It fell to near three-month lows against the franc on Wednesday as fresh data indicated a slowdown in European business activity.
The euro currency was soft against the yen, hitting a nine-month low of 128.01 yen.
The European Central Bank’s chief economist said on Thursday there are “clouds” on the horizon, including plans by Italy’s would-be government to loosen fiscal policy and roll back a pension reform, and international trade tension.
The dollar’s fall appeared to accelerate after the minutes of the Fed meeting.
While most policymakers thought it likely another U.S. interest rate increase would be warranted - in line with market expectations - the minutes showed the Fed would tolerate inflation rising above its goal for a time.
Trump opened a front in the trade war on Wednesday by considering new tariffs, this time on cars, just days after Washington agreed with Beijing to put “on hold” its plan to impose tariffs on $150 billion worth Chinese goods.
Against the yen, the dollar shed 0.7 percent to 109.3 yen, a day after it experienced its biggest fall in nearly three months.
The safe-haven Swiss franc also ticked up 0.2 percent to 0.9914 franc to the dollar. It hit a three-week high of 0.9894 per dollar on Wednesday.
The euro rose off a six-month low on Thursday as the dollar faltered but concerns over an economic slowdown in Europe and political risks in Italy continued to act as a brake. The euro is set to be down for a sixth consecutive week against the dollar — the longest weekly losing streak since January 2015...READ MORE
...If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5%, too...
• USD/US bond yields stall dovish FOMC minutes-led downslide.
• JPY further weighed down by rebounding European equities.
• Second-tier US economic data eyed for some fresh impetus.
The USD/JPY pair recovered a part of early steep decline and has managed to rebound around 40-pips from 1-1/2 week lows.
The market now seems to have fully digested Wednesday's FOMC monetary policy meeting minutes, with a modest rebound in the US Treasury bond yields helping the US Dollar to stall its overnight profit-taking slide from fresh yearly tops.
This coupled with a slight improvement in investors' risk appetite, as depicted by a goodish pickup in the European equity markets, further weighed on the Japanese Yen's safe-haven appeal and collaborated to the pair's modest rebound.
Despite the pull-back, the pair, so far, has held in negative territory for the third consecutive session and remained below the very important 200-day SMA, and the key 110.00 psychological mark.
In absence of any major market moving economic releases, the pair remains at the mercy of broader market risk sentiment and the USD/US bond yield dynamics ahead of Friday's US monthly durable goods orders data and the Fed Chair Jerome Powell's scheduled speech.
Technical levels to watch
Any subsequent recovery move is likely to confront fresh supply near the 110.00 handle and is closely followed by 200-DMA resistance near the 110.15-20 region, above which the pair is likely to aim back towards conquering the 111.00 handle.
On the flip side, the 109.40-35 region might continue to act as an immediate support, which if broken might turn the pair vulnerable to break below the 109.00 handle and head towards testing its next support near the 108.80-70 region.
The market now seems to have fully digested Wednesday's FOMC monetary policy meeting minutes, with a modest rebound in the US Treasury bond yields helping the US Dollar to...READ MORE
After bottoming out in the 1.1680/75 band on Wednesday, EUR/USDmet some buying interest and has now managed to regain the 1.1700 mark and above.
EUR/USD now looks to ECB
The pair trades with decent gains during the second half of the week, although it is still submerged into the broader bearish picture that saw a drop to fresh multi-month lows near 1.1675 yesterday.
The greenback is now a tad offered around the 93.80 region after recording tops near 94.20 on Wednesday, levels last seen in mid-December 2017.
Spot paid little attention to the release of the FOMC minutes on Wednesday, where the Committee noted that a temporary overshooting of the Fed’s inflation target would be in line with the symmetric inflation objective.
In the data space, German Q1 GDP figures showed the economy expanded 0.3% inter-quarter and 1.6% YoY, matching estimates. Later in the day, the ECB will publish its minutes from the April meeting, although it is worth recalling that President Draghi noted during his press conference that the Council did not discuss monetary policy, so the impact on FX could be limited.
Across the pond, the usual weekly report on the US labour market is due along with Existing Home Sales and the speech by NY Fed W.Dudley (permanent voter, centrist).
EUR/USD levels to watch
At the moment, the pair is up 0.08% at 1.1705 facing the next up barrier at 1.1829 (high May 22) seconded by 1.1808 (10-day sma) and finally 1.1897 (21-day sma). On the flip side, a break below 1.1676 (2018 low May 23) would target 1.1668 (low Oct.8 2017) en route to 1.1659 (monthly low Oct. 27 2017).
Spot paid little attention to the release of the FOMC minutes on Wednesday, where the Committee noted that a temporary overshooting of the Fed’s inflation target would be in line with the...READ MORE
Risk-aversion remained the main underlying theme in Asia this Thursday after Trump brought in fresh tariffs on auto imports while North Korea threatened to call-off the June Summit. The US dollar extended post-FOMC minutes weakness across its main competitors, offering some respite to the Antipodeans. However, the recovery gains remained capped amid negative Asian equities and weaker oil prices.
The Yen, on the other hand, continued to outperform and reached fresh weekly lows near 109.40 against its American peer. Another safe-haven, gold, also extended its corrective rally and looked set to test the $ 1300 mark amid the resurgence of global trade tensions.
Main topics in Asia
Trump's new US auto tariff proposal to weigh on risk
The WSJ has run an article in recent trade which could be a weight on market sentiment as trade war risk comes back to the fore.
USD/TRY retreats on much-needed intervention after Lira plummets past 4.925
The Lira tumbled 5.7% on Wednesday in the lead-up to intervention by the Turkish central bank, and the USD/TRY pair peaked at an all-time high of 4.9262 before the central bank …
Australia's RBA head warns about Chinese debt - Australian Financial Review
Australia's Reserve Bank of Australia head, Philip Lowe, spoke on Wednesday about the hazards posed to Australia from China due to the interconnected nature of their economies, as noted by the Australian Financial Review.
North Korea threatens to call off Summit, calls pence a ‘political dummy’ - WSJ
The Wall Street Journal (WSJ) reports comments from Choe Son Hui, North Korea’s Vice Minister of Foreign Affairs, with further insights on the earlier headlines that cited ‘North Korean official to suggest reconsidering US summit meeting - Korea press’.
BOJ's Sakurai: Yield curve control will boost inflation expectations
Bank of Japan (BOJ) board member Sakurai said on Thursday expressed confidence the stimulative effect of yield curve control policy will boost inflation expectations and stressed the BOJ needs to hit the price goal at the earliest date possible.
China Commerce Ministry: China does not pledge a number to US trade surplus cut
Following comments are reported by Reuters from China’s Commerce Ministry (MOFCOM), as China reacts to the latest US tariffs on autos.
Key Focus ahead
After a data-light Asian session, markets look forward to the European calendar, with plenty of event risks in stores for today. The German final GDP and GfK Consumer Climate will be reported in early Europe while the UK retail sales report is the only economic data due on the cards in the European session. However, a slew of speeches from the global central bankers will keep the traders busy.
0700 GMT - FOMC Dudley’s speech
0800 GMT – BOE Carney’s speech
0815 GMT – FOMC Williams’ speech
0830 GMT – ECB Praet’s speech
1030 GMT – ECB Praet’s speech (round 2)
Also, in focus remains the ECB May monetary policy meeting minutes that will be published at 1130 GMT. In the NA session, the US docket will see the usual weekly jobless claims release, followed by existing home sales data. Meanwhile, FOMC member Bostic, Harker will be seen speaking in the mid-American session. BOE Governor Carney will be seen back on the wires at 1700 GMT, speaking at the Society of Professional Economists' annual dinner, in London.
EUR/USD gasps for breath at 1.17 as the decline continues ahead of German GDP
The EUR/USD is trading around the 1.1700 level ahead of Thursday's European market session, and the pair is struggling to develop a bounce from Wednesday drop.
GBP/USD: Fed-BOE divergence hurts, eyes UK retail sales
The GBP/USD has been oversold for three weeks now, according to the 14-day relative strength index (RSI), still, the corrective rally remains elusive. The monetary policy divergence will likely widen further in a GBP-negative manner if the UK retail sales miss estimates.
UK retail sales to rebound in April - Barclays
The Barclays Research Team offers a sneak peek at what to expect from today’s UK retail sales slated for release at 0830 GMT.
Trump to appear in a Fox TV interview at 1000 GMT - Twitter
The US President Trump, in his latest tweet, announced his interview on Fox TV at 0600 AM NY Time (1000 GMT) later on Thursday.
Risk-aversion remained the main underlying theme in Asia this Thursday after Trump brought in fresh tariffs on auto imports while North Korea threatened to call-off the June Summit. The US dollar extended post-FOMC minutes weakness across its...READ MORE
Analysts at Scotiabank noted that sterling is soft, with Cable reaching its lowest level since Dec. Apr UK CPI data showed prices generally softening, counter to expectations for steady inflation.
"CPI rose 0.4% M/M against expectations of a 0.5% gain, for a 2.4% Y/Y print (versus +2.5% expected); core CPI continued the retreat that began at the start of the year by easing to +2.1% Y/Y, the lowest reading in more than a year."
"Weaker than expected CPI casts further doubt about the BoE’s ability to tighten interest rate policy in Aug (markets pricing in now 5.5bps of a 25bps increase)."
"Meanwhile, the UK government continues to struggle to advance its Brexit policy. Cable downside risks remain."
Analysts at Scotiabank noted that sterling is soft, with Cable reaching its lowest level since Dec. Apr UK CPI data showed prices generally softening, counter to expectations for steady inflation.READ MORE
The euro fell to near three-month lows against the Swiss franc on Wednesday as fresh data indicating a slowdown in European business activity cast a shadow over the timing of the central bank’s rate hike, while concerns over Italian politics rose.
The yen surged 1.2 percent against the dollar, set for its biggest daily rise in more than a year, as a wave of caution swept currency markets a day after U.S. President Donald Trump tempered optimism over progress made in trade talks with China.
Carry trades, where investors borrow in relatively low yielding currencies to invest in higher-yielding ones, came under pressure with the euro/swiss franc falling to its lowest levels since early-March.
The euro has unwound all of its rally against the franc since the Italian elections as the prospect of a spendthrift coalition government taking shape in Rome unnerved investors.
The euro fell to near three-month lows against the Swiss franc on Wednesday as fresh data indicating a slowdown in European business activity cast a shadow over the timing of the central bank’s rate hike, while concerns over Italian politics rose.READ MORE
Sterling fell to a new 2018 low on Wednesday after weaker-than-expected UK inflation cast doubt on whether the Bank of England (BoE) will raise interest rates this year.
Annual consumer price inflation cooled to 2.4 percent, its weakest increase since March 2017.
Sterling slumped 0.6 percent after the data to $1.3347, its lowest since Dec. 21 and government bond prices rallied, pushing five-year gilt yields to their lowest since May 14.
Worries about Brexit and a recent run of weak economic data means markets are now not even pricing in a full 25-basis-point hike by the end of 2018.
A broad rally by the dollar has helped cause what had been one of the best-performing major currencies to give up all its 2018 gains.
BoE policymaker Gertjan Vlieghe told the Treasury Committee of parliament on Tuesday that policy rates are set to rise 25 to 50 basis points every year over three years.
But a surprise drop in consumer price inflation in early 2018, partly blamed on bad weather, and weak economic growth figures have called into question whether the BoE will tighten monetary policy at all this year.
This month, the BoE refrained from an interest rate hike that had at one point been widely expected.
Risks around the sort of relationship Britain can agree with the European Union after leaving the bloc continue to weigh on the pound.
Britain’s foreign minister Boris Johnson said the country must ditch EU tariff rules as quickly as possible and run its own trade policy, Bloomberg reported on Tuesday.
UK gross domestic product figures due out on Friday will also be scoured for clues on monetary policy.
Sterling fell to a new 2018 low on Wednesday after weaker-than-expected UK inflation cast doubt on whether the Bank of England (BoE) will raise interest rates this year. Annual consumer price inflation cooled to 2.4 percent, its weakest increase since March 2017.READ MORE
...If you don't have time to do it right, when will you have time to do it right?...