- Forex today was upbeat in the North American session following positive headlines surrounding Brexit and trade.
- Ongoing NAFTA talks in Washington lifted the indexes in North America with optimistic statements from Canada’s Freeland and Trudeau and US President Trump that a deal will be finalised this Friday.
On the Brexit front, comments from the European Union’s chief Brexit negotiator Michel Barnier who said that the bloc was prepared to offer Britain an unprecedentedly close relationship after it quits the EU lifted risk sentiment as well.
However, it was the Emerging markets that took the limelight with the Argentina peso collapsing as traders figure that the Fed’s path of rate hikes will continue after all and into 2019, intensifying offshore USD liquidity squeeze. This sentiment comes on the back of yet further positive data from the US. The Q2 gross domestic product that was arriving at 4.2% as an annualized figure, beating the estimates that matched the initial reading at 4.1 helped kick off the day in a positive light as this data was showing the economy at the fastest pace of expansion in almost four years and following Tuesday’s consumer confidence that was arriving at its highest level since October 2000. However, the DXY was trading in a range of between 94.93 to 94.53 and closing nearer to the lows.
Currency action
The euro was driven by flows through the cross and sterling given the Brexit lead rally in the pound and EUR/GBP dumping hard. EUR/USD was picked up n London off the lows down at 1.1651 and rallied to 1.1709 the NY high, closing around there. The pair was benefitting from the EU/US swap 10yr spread whereby the market has eroded up through the 2017-20018 downtrend and the 55-day ma and eyes are set om the 200-day ma at -1.858. The market is watching for EUR/USD to test the1.1790’s on such positive moves in EU yields. As for the pound, it rallied hard on the Brexit headlines and jumped from 1.2863 to 1.3132, closing above the 40 DMA (1.3008) for the first time since April and a few pips shy of the 50-D SMA located at 1.3042. As for the cross, EUR/GBP dived on the headlines from 0.9091 psychological level down to a low of 0.8981 and closed there as well. USD/JPY was better bid and managed a close above the cloud as stocks and sentiment stayed positive on Wall Street on Wednesday. Bulls are looking for a close above 61.8% at 111.88 that would open up the way to 113.18 July high. However, much will depend on trade risk with the US and China still firing shots on the trade war. The haven yen could pick up a bid if the US adds tariffs on $200 of China exports. Also, eyes on the EMs for potential safe-haven bids in the yen. As for the Aussie, buyers were nowhere to be seen following the sell-off from Tuesday’s business up at 0.7361. The Aussie made a low of 0.7274 and was barely able to manage a score back on the 0.73 handle. Eyes are on EM risk and the Yuan. Chinese efforts at stabilizing their currency may not be sustainable and a general fear over the EM space leans heavy o the Aussie as a proxy.
Key notes from US
Brexit Minister Raab: “A UK-EU deal is within our sights”
Wall Street: fresh record highs, but perhaps a correction is due on a technical basis
Key events ahead
Share
