Forex today experienced cautious optimism in Asia, as markets reassessed the renewed hopes on the US-China trade front, as both the trade teams look to meet in-person next month amid looming additional US tariffs. Also, escalating Hong Kong protests somewhat weighed on the market sentiment.
The Asian stocks tracked Wall Street’s risk-on rally and hit weekly tops while S&P 500 futures held onto moderate gains. The US Treasury yields, however, failed to extend the upside amid lingering US recession fears. Meanwhile, gold prices consolidated the overnight decline around $ 1525, as the US dollar continued to hold firmer across the board.
Among the G10 currencies, the Kiwi, once again, emerged the laggard and renewed four-year lows below the 0.63 handle. The AUS/USD pair also slipped on a sharp drop in the Australian building permits data and retested the 0.6700 support. Meanwhile, the Canadian dollar also followed suit, with USD/CAD back above the 1.3300 barrier amid a pause in the oil-price rally. The Yen, on the other hand, managed to recover some ground vs. the greenback, as USD/JPY traded on the back foot near 106.50 levels.
Heading into Europe, the EUR/USD pair traded weaker below 1.1050 amid increased European Central Bank (ECB) stimulus bets while the Cable posted small losses below 1.2200 amid looming Brexit risks.
Main Topics in Asia
China clarifies tariff hike rate, exemption issues for listed US imports – Xinhua
US Pres. Trump officially launches Space Command in counter to Russia, China threats – WaPo
S&P Global Ratings cut Argentina’s foreign and local-currency credit ratings to “selective default
Oil defying gravity at trend-line resistance, prospects for $60 increasing
Hong Kong activist Joshua Wong was arrested
PBOC sets Yuan reference rate at 7.0879
BOJ trims purchases of JGBs maturing in 5 to 10 years
Bank of Korea leaves key rate unchanged at 1.50%
BOK’s Lee: Still has certain amount of policy room
RBA: High debt levels could complicate future monetary policy decisions
Gold technical analysis: Thursday’s bearish outside day makes today’s close pivotal
Germany’s Roettgen: EU should not let itself be scared into Brexit renegotiation
Key Focus Ahead
Friday’s EUR macro calendar remains a busy one, with the immediate focus on the German July Retail Sales data at 0600 GMT, which could offer some reprieve to the EUR, especially after the previous rebound in volume. At the same time, the UK August Nationwide House Prices data will drop in but is unlikely to have any impact on the pound. Moving on, at 0900 GMT, the key Eurozone July employment and August Preliminary Consumer Price Index (CPI) figures will be reported. A softer inflation print is likely to bolster the ECB stimulus calls and drag EUR/USD down to 1.1000 key support. Meanwhile, the sentiment across Europe will be also driven by fresh Brexit/ UK political developments amid a few data points from Italy.
The NA session sees the all-important Canadian quarterly and monthly GDP releases alongside the US Core Personal Consumption Expenditure (PCE) Price Index for June and Personal Spending data, all of which will be released at 1230 GMT. Traders also look forward to the US Michigan Consumer Sentiment Index and Baker Hughes US Oil Rig Count data due at 1400 GMT and 1700 GMT respectively.
Despite a busy docket, the risk sentiment will likely remain at the mercy of any fresh US-China trade headlines and US President Trump’s comments, as we head into a monthly close.
EUR/USD is teasing second straight monthly loss
EUR/USD is currently reporting a moderate monthly loss. The pair fell more than 2% in July. A big beat on German retail sales data is needed to avert monthly loss. The pair may also take cues from the Eurozone CPI and US personal spending figures.
GBP/USD keeps the red despite Brexit negotiators ready “to step-up tempo”
The GBP/USD pair shrugs-off the UK PM’s readiness to hold biweekly Brexit talks with the EU amid broad UK political uncertainty, as the quote is on its way to third consecutive daily declines ahead of the London open.
EU Inflation Preview: ECB’s aggressive stimulus coming and nothing can change that
European inflation expected to remain depressed through August. The European Central Bank already announced stimulus coming to boost growth. EUR/USD long-term bearish trend set to continue once below 1.1026.
Canadian GDP Preview: Upbeat figure may be an opportunity to sell CAD – scenarios
Economists expect Canadian growth of 3% in the second quarter. Upbeat growth may be a one-off amid a sea of issues. USD/CAD may drop in response to the news but rise afterward.
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