- Forex today was making for a mixed dollar on conflicting trade war headlines.
First a story released by Bloomberg that explained that the U.S. and China are trying to restart talks aimed at averting a full-blown trade war between the world’s two largest economies. then there was a news later in the session from The WSJ that said Washington hasn’t made meaningful progress in easing its market-rattling trade dispute with Beijing – which capped the benchmarks on Wall Street.
Currency action
The DXY traded between 94.1640-94.5680 but started to rally within the range on the back of strong Conference Board Consumer Confidence arriving at 127.4 vs 126.0. As for the yields, the US 10yr yields fell from 2.97% to 2.93% on the BoJ meeting before climbing back to 2.96% on improved risk appetite improved. The two-year yields climbed to 2.67%.
As for the euro, the US/DE spread was favouring the pair after the EZ HICP inflation arrived at 2.1% vs 2.0%. However, the IMF came out and said that on Greece’s debt is unsustainable and euros strength was thus challenged on the statement. At the same time, the dollar picked up a bid, US/DE went back in the USD’s favour and EUR/USD gave up all its gains to sit near 10, 21 & 55-DMAs late in the day having been as high as 1.1750 resistance. Sterling was left in a range between familiar levels, notably the 10-D SMA and 30-D SMA finishing the North American session at 1.3120 down 0.1% and between 1.3173-1.3089 as traders look ahead t the BoE and FOMC this week. The cross was pretty much flat for the day at 0.8915. USD/JPY was up knocking in 112’s door, (bulls hunting down a close daily Tenkan at 111.88 to open the 113.17 2018 highs), due to the recent surge in IMM longs, the JGB yields falling on the back of the BoJ’s dovish rhetoric and strong US data, let alone the positive outlook for trade talks between China and the US. There is plenty of data on the cards now with ADP, ISM and FOMC ahead of the nonfarm payrolls showdown on Friday.
As for commodities, prices were weaker despite the optimism over US-China trade talks and headway being made over NAFTA negotiations. AUD/USD bulls were looking into 0.7440 in the North American session after a choppy start and ended the day above 10 & 21-DMAs as the dollar gave back late in the day. The Kiwi was performing robustly between 0.6808 and 0.6824 until the NZ jobs data knocked the bird down to test 0.68 the figure again.
Key notes from US / early Asian session:
- New Zealand Unemployment Rate ticks higher, mixes with positive Employment figures
- Wall Street records decisive gains led by industrials and real estate
Key events ahead:
Analysts at Westpac offered their outlook for tofday’s key data i Asia:
Australia’s data calendar is empty. In Asia there are various July manufacturing surveys and S Korea July CPI, ahead of the Reserve Bank of India policy decision. Most forecasters look for another 25bp rate hike to 6.5%, but with a sizeable minority expecting no change. Inflation has been ticking up but growth momentum is softening.
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