Every day, I’ll be giving you a recap of all you need to know about what happened during the U.S. Session.
From economic reports to news that rocked the markets, you get a quick review of events that moved the major currencies.
You’ll also see these recaps on Forex Market News- BabyPips.com
Pip Diddy
#U.S. Session Recap: Small Boost for USD, Franc Maintains Lead
The dollar managed to get a reprieve from its slide thanks to strong consumer confidence data and higher US bond yields. Other medium-tier reports, however, actually printed weaker than expected results.
U.S. goods trade deficit widened from $67.9B to $72.2B vs $68.6B forecast
U.S. preliminary wholesale inventories up 0.7% vs. 0.1% consensus
S&P/CS house price index down from 6.5% to 6.3% vs. 6.4% forecast
CB consumer confidence index up from 127.9 to 133.4 in Aug
Richmond manufacturing index up from 20 to 24 vs. estimate at 18
API: Crude oil stockpiles up 38K barrels vs. estimated 0.5M drop
Germany to provide a financial lifeline to Turkey?
##Major Events/Reports:
###Consumer confidence hits record high
It turns out Americans are in a very cheery mood this month as the CB consumer confidence index surged to its highest level since October 2000.
The index advanced from an upgraded 127.9 figure in July to 133.4 in August instead of dipping to the projected 126.6 reading. Components of the report revealed that consumers’ assessment of business and labor conditions improved further.
Even better, the percentage of consumers expecting business conditions will get better over the next six months ticked up from 22.9% to 24.3% during the month.
Now this is a pretty big deal since stronger consumer confidence is seen as a leading indicator of higher spending, as folks are more likely to go on shopping sprees instead of keeping their hands in their pockets.
##Stocks up, commodities down
Most higher-yielders still managed to squeeze out a few gains during the session on positive trade developments, but the gains were feeble.
Dow 30 index is up 14.38 points to 26,064.02 (+0.06%)
S&P 500 index is up 0.78 points to 2,897.57 (+0.03%)
Nasdaq is up 12.14 points to 8,030.04 (+0.14%)
Gold returned some of its earlier gains while crude oil took more hits, likely on additional downside pressure from API data.
Private crude oil inventories ticked up 38K barrels in the previous week versus estimates of a 0.5 million draw.
##Major Market Mover(s):
###USD
The dollar caught a few bids during the session thanks to a surge in consumer confidence and upticks in U.S. bond yields.
USD/JPY bounced from 111.09 to 111.25, USD/CHF found support around .9750 and pulled up slightly to .9778, EUR/USD retreated to the 1.1700 mark, and GBP/USD is down to 1.2867.
###CHF
The Swiss franc was able to hold on to its lead from earlier in the day and even squeezed out a few gains before the New York session closing bell tolled.
NZD/CHF slid from .6548 to a low of .6541, EUR/CHF dropped from 1.1434 to 1.1418, GBP/CHF tumbled to 1.2567, and CHF/JPY advanced from 113.74 to 113.83.
###EUR
On the flip side, the euro took some hits, possibly due to the rebound in the dollar and also on reports that Germany is looking to throw a financial lifeline to Turkey. This appears to have revived speculations that the threat of contagion in Europe is getting real.
EUR/JPY retreated from a session high of 130.26 to 129.97; EUR/AUD is down to 1.5921; EUR/CAD also fell to 1.5117; EUR/NZD dipped to 1.7416, but EUR/GBP is still up at the .9100 mark.
##Watch Out For:
Tentative: Australia’s HIA new home sales (2.2% previous)
5:00 am GMT: Japanese consumer confidence index (dip from 43.5 to 43.4 eyed)
This post first appeared here:
#U.S. Session Recap: Pound Pops Higher on Prospect of New EU Deal
This week seems to be all about putting rivalries aside! Word through the forex grapevine is that the EU is ready to offer the U.K. a Brexit deal unlike any other.
It’s no surprise that pound pairs kicked higher and lifted the mood on Wall Street once more, following through on the upbeat sentiment from the U.S.-Mexico trade deal earlier this week.
U.K. Brexit minister Raab: Deal “within our sights”
Raab: Aiming to strike a deal by October but has “measure of leeway”
EU Brexit negotiator Barnier: Ready to offer unique partnership with U.K.
Canadian current account deficit narrowed from C$17.5B to C$15.9B
U.S. preliminary Q2 GDP upgraded from 4.1% to 4.2% vs. 4.0% consensus
U.S. preliminary Q2 GDP price index unchanged at 3.0%
EIA crude oil inventories down 2.6M barrels vs. projected 0.7M drop
U.S. pending home sales sank 0.7% vs. projected 0.3% uptick
New Zealand building consents fell 10.3% after earlier 8.2% slide
##Major Events/Reports:
###Brexit deal unlike any other?
In a testimony before a committee of the House of Lords, U.K. Brexit minister Dominic Raab assured that he is “confident that a deal is within our sights.”
However, he also clarified that there is a “measure of leeway” when it comes to striking a deal by the next EU Summit in October, adding:
“I think it is important as we enter the final phase of the negotiations in the lead up to the October council, and the possibility that it may creep beyond that, we want to see some renewed energy.”
Although some lawmakers suggested giving in to some of the EU’s demands, Raab insisted that they “don’t beg” and that he’s “stubbornly optimistic” about getting an agreement that benefits both sides. He also mentioned that the possibility of not paying the €39 billion settlement is on the table if no deal is reached.
But what really led pound bulls to charge are the remarks of EU chief negotiator Michel Barnier to reporters in Berlin hours later, declaring:
“We are prepared to offer Britain a partnership such as there never has been with any other third country.”
And if there’s anything we learned from Kingsman, it’s that Brits do love bespoke suits, shoes, spy gadgets… and now a bespoke Brexit deal!
Barnier acknowledged that they “respect Britain’s red lines scrupulously” but added:
“In return, they must respect what we are. Single market means single market. There is no single market a la carte.”
Raab is headed back to Brussels to resume negotiations on Friday, with Barnier reportedly adjusting his busy schedule to make room for five hours of talks then.
##Major Market Mover(s):
###GBP
Pound pairs skyrocketed on the prospect of the U.K. getting an unprecedented customized deal from the EU, possibly leading to more constructive negotiations later in the week.
GBP/USD popped from a session low of 1.2864 to a high of 1.3033, GBP/JPY jumped from 143.28 to 145.60, EUR/GBP retreated to a low of .8983, GBP/NZD is up to 1.9411, and GBP/AUD rallied to 1.7825.
###CAD
The Loonie pared most of its earlier losses thanks to an uptick in crude oil and another set of positive NAFTA updates.
USD/CAD fell from a session high of 1.2963 to 1.2854, CAD/JPY recovered from 85.90 to 86.55, EUR/CAD dipped to the 1.5100 mark, and AUD/CAD is down to .9436.
##Watch Out For:
11:50 pm GMT: Japanese retail sales y/y (dip from 1.7% to 1.3% eyed)
1:00 am GMT: New Zealand ANZ business confidence index (previous reading at -44.9)
1:30 am GMT: Australia’s quarterly private capital expenditure (gain from 0.4% to 0.6% expected)
1:30 am GMT: Australian building approvals m/m (2.2% drop expected)
Tentative: Australia’s new home sales (2.2% previous)
This post first appeared here:
#U.S. Session Recap: Trade Fears and Emerging Markets Jitters Return
Riskier assets once again found themselves on the back foot as Trump’s threat to impose another round of tariffs on China dampened the positive mood from the past few days.
Adding more jitters to the mix is the 20% slide in the Argentinian peso’s value, which put the spotlight back on troubles in emerging markets.
##Major Events/Reports:
###Trump revives trade tensions
Just when it seemed this week was shaping up for a happily-ever-after when it comes to trade drama, U.S. President Trump brought tensions back to the table in reminding that they’re ready to slap another set of tariffs on China.
Sources familiar with the matter shared that the POTUS has instructed his aides to impose higher duties of 25% on $200 billion worth of Chinese goods by next week. This would include items like home building supplies, technology products, bicycles and apparel.
In an interview with Bloomberg later in the session, Trump also said that he can pull the U.S. out of the World Trade Organization (WTO) if “they don’t shape up.”
###Downbeat Canadian GDP
The Loonie paused from celebrating NAFTA developments as it took hits when the Canadian monthly GDP disappointed. The economy neither expanded nor contracted in June versus analysts’ expectations of a 0.1% growth figure.
Still, this was enough to keep growth at 2.9% for Q2, faster than the 1.4% expansion logged in the previous quarter but a couple of notches lower than the forecast of 3.1% GDP.
On a more positive note, exports chalked up an impressive 12.3% jump for the quarter, its steepest pace of growth since 2014. On the flip side, business investment slowed to just 1.5% which is its slowest gain since 2016.
###U.S. data in line with forecasts
Uncle Sam’s latest spending and inflation reports managed to hit their marks, still keeping Fed tightening expectations mostly supported.
The core PCE price index, which is said to be the central bank’s preferred inflation measure, posted a 0.2% uptick as expected versus the earlier 0.1% gain. This brings the year-over-year figure from 1.9% in June back to 2.0% in July, marking the third time that the index has hit the Fed’s target so far this year.
Personal income rose 0.3% also as expected but this was slower compared to the earlier 0.4% gain while personal spending posted another 0.4% increase. Number crunchers say that this points to a strong start for consumer spending during the third quarter.
###Risk aversion and profit-taking
A combination of month-end profit-taking and risk-off flows from trade jitters led equity indices to snap their winning streaks for the week.
Gold continued to retreat, presumably on a bit of dollar strength, while crude oil surprisingly ticked higher. Perhaps the commodity stayed supported thanks to the reduction in EIA stockpiles reported yesterday and the fact that Iran’s exports are sliding due to sanctions.
##Major Market Mover(s):
###JPY
Resurfacing trade tensions propped up the lower-yielding yen during the safe-haven rallies while traders seemed hesitant to pile on dollar longs.
USD/JPY retreated from 111.57 to the 111.00 mark, EUR/JPY dipped from 130.52 to 129.51, GBP/JPY fell back to 144.50, and AUD/JPY sank to a low of 80.49.
###NZD
The Kiwi found itself behind the pack, possibly on the return of dollar strength and Fonterra’s milk payout forecast downgrade. Keep in mind that this higher-yielding currency has been most vulnerable among its peers, owing to the RBNZ’s not-so-upbeat policy bias.
NZD/USD sank from .6667 to a low of .6636, NZD/JPY tumbled from 74.30 to a low of 73.67, EUR/NZD popped up to a high of 1.7582, GBP/NZD advanced to 1.9580, and AUD/NZD is up to 1.0925.
##Watch Out For:
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#U.S. Session Recap: GBP Keeps Sliding, Bank Holiday in U.S. and Canada
Major pairs were off to a slow session as traders from the U.S. and Canada were out enjoying the Labor Day holiday. The pound was still on weak footing, owing to weekend Brexit updates and downbeat U.K. manufacturing PMI.
U.K. BRC retail sales monitor up 0.2% vs. 1.2% forecast, 0.5% previous
Argentina announces austerity measures
Trump reportedly canceled Labor Day plans to take trade calls
U.S. and Canadian banks closed for the Labor Day holiday
##Major Events/Reports:
###Emerging markets in focus
In an effort to shore up their finances and secure a loan from the IMF, Argentine President Mauricio Macri announced new export taxes and spending cuts for next year’s budget.
This could also lend some support for their currency, which tanked more than 15% last week, and could prevent further concerns in emerging markets. Earlier on, Turkey’s central bank announced an interest rate hike to keep inflation in check.
Over in Brazil, news that the country’s electoral court banned Luiz Inacio Lula da Silva from running in the October presidential polls spurred a sharp drop in the real.
###Oil higher, futures muted
Crude oil continued to rake in more gains as traders appear to be pricing in the impact of the next round of U.S. sanctions on Iran.
WTI crude oil is up 31 cents to $70.10 per barrel (+0.42%)
Brent crude oil rose 37 cents to $78.01 per barrel (+0.48%)
Note that Iran already reported a decline of 150,000 barrels per day in the previous month, before another set of sanctions will be put in place by November.
Traders appear to be taking recent developments in trade and emerging markets in stride, with futures pointing to a bit of caution.
Dow 30 index futures are up to 26,031.0 (+0.17%)
S&P 500 index futures are up to 2,908.00 (+0.21%)
Nasdaq futures are up to 7,677.15 (+0.22%)
Asian indices are also looking mixed:
Nikkei 225 futures are in the green at 22,785.00 (+0.08%)
China A50 index futures are up to 11,284.00 (+0.11%)
Australia’s S&P ASX 200 futures are down to 6,300.5 (-0.43%)
##Major Market Mover(s):
###GBP
The pound slowed down with its slide and made a small bounce but was still the weakest among the bunch by the end of the trading day, unable to fill its weekend gaps.
GBP/USD inched down from 1.2888 to a low of 1.2854 before pulling up slightly to 1.2878, GBP/JPY tumbled to a low of 142.86, EUR/GBP kept climbing to .9027, and GBP/NZD retreated to a low of 1.9436.
##Watch Out For:
1:30 am GMT: Australian current account balance (wider deficit of 11.1B AUD eyed from earlier 10.5B AUD shortfall)
4:30 am GMT: RBA interest rate statement (Here’s what to expect.)
This post first appeared here:
#U.S. Session Recap: Dollar Extends Rally on PMI, GBP Bounces on Irish Border Rumors
Dollar domination was still the name of the game for the rest of the New York session, as the U.S. currency got an extra kick from upbeat ISM manufacturing PMI.
The pound was under some pressure during the BOE Inflation Report hearings, but it managed to bounce along with the euro when rumors of the EU being willing to adjust their Irish border stance came out.
BOE Gov Carney: Willing to stay through Brexit transition as BOE head
Carney: Less than 20% of firms have contingencies for “no deal” Brexit
BOE official Haldane: Odds of “no deal” up to 25% from 20% months ago
Haldane: Shock to prices won’t be one-off, could damage supply capacity
Canadian manufacturing PMI dipped from 56.9 to 56.8
U.S. ISM manufacturing PMI jumped from 58.1 to 61.3 vs. 57.6 consensus
U.S. construction spending up 0.1% vs. 0.5% forecast
IBD/TIPP economic optimism index down from 58.0 to 55.7 vs. 57.2 forecast
New Zealand GDT auction yielded 0.7% dip in prices, -3.6% previous
Australia’s AIG services index down from 53.6 to 52.2
##Major Events/Reports:
###BOE Inflation Report hearings
Policymakers from the U.K. central bank, including head honcho Carney himself, shared their economic outlook to Parliament and it’s no surprise that Brexit issues took center stage.
Guv’nah Carney tried to assure a smooth transition throughout the breakup process with the EU as he mentioned that he is willing to stay on as central bank head, possibly until beyond next year.
Although Carney warned that the U.K. economy could suffer a shock in a “no deal” Brexit situation and that sterling could take a huge hit, he pointed out that this would be an extreme scenario. He added that less than 20% of British firms have made contingency plans for operations if this happens.
However, BOE Chief Economist Haldane noted that the odds of a “no deal” outcome have risen from 20% to 25% over the past months. He added that the potential shock to prices in this scenario wouldn’t just be a one-off and instead could damage the supply capacity of the economy.
Furthermore, Haldane projected that these pass-through effects could last a number of years and affect their policy outlook.
###Upbeat U.S. ISM manufacturing PMI
Data from Uncle Sam turned out much better than expected, lifting NFP expectations and reminding traders that the Fed is poised for more rate hikes this year.
The ISM manufacturing PMI for August jumped from 58.1 to 61.3 to reflect a stronger pace of expansion versus expectations of a dip to 57.6. Underlying data revealed that the employment component rose from 56.5 to 58.5 during the month, although the indices for production and new orders led the gains.
###EU looking at Irish border options
Supporting the earlier narrative that the EU might be willing to make concessions in Brexit negotiations, an EU lawmaker shared that they might be open to adjusting their stance on the Irish border backstop.
Recall that this issue has been a thorn in the side for negotiators as the EU initially set out a plan for avoiding a hard border in order to keep Northern Ireland within the bloc and customs union – something that U.K. PM May’s government has strongly opposed, as this would result to a customs frontier between the U.K. and the island.
##Major Market Mover(s):
###USD
The Greenback carried on with its climb for the most part of the session, getting additional support from upbeat economic data and some risk-off flows.
USD/JPY advanced from 111.24 to 111.47, USD/CHF is up from .9737 to a high of .9768 then retreated back to .9747, AUD/USD stayed below the .7200 handle, and USD/CAD popped up to a high of 1.3209.
##Watch Out For:
1:00 am GMT: New Zealand ANZ commodity prices
1:30 am GMT: Australia’s quarterly GDP (0.7% growth expected, 1.0% previous)
1:45 am GMT: Chinese Caixin services PMI (dip from 52.8 to 52.7 eyed)
This post first appeared here:
#U.S. Session Recap: BOC Holds, Pound Jumps Then Slumps on Brexit “Progress”
The spotlight was on the Canadian dollar as the BOC decision and NAFTA updates came in play, but the pound was the biggest mover on rumors of a Brexit agreement between the U.K. and Germany.
Canadian trade deficit narrowed from 0.7B CAD to 0.1B CAD
Canada’s labor productivity up 0.7% vs. 0.5% forecast, -0.3% previous
U.S. trade deficit widened from $45.7B to $50.1B vs. $50.2B expected
Bank of Canada kept interest rates unchanged at 1.50% as expected
BOC: Elevated trade tensions remain a risk
BOC: GDP to slow slightly in Q3, CPI to move back to 2% in early 2019
FOMC member Bostic: U.S. economy performing well at full employment
FOMC member Kashkari still seeing some labor market slack
Bloomberg source: Germany open to “less detailed agreement” on Brexit
German gov’t spokesperson: German position on Brexit unchanged
Canadian foreign minister Freeland: Making progress in NAFTA talks, much goodwill
##Major Events/Reports:
###BOC rate statement
As expected, BOC head honcho Poloz and his fellow policymakers decided to keep interest rates on hold at 1.50% while keeping the door open for future tightening.
In their official statement, central bank officials highlighted stronger than expected inflation in July but dismissed this as a one-off result from higher airfare. They projected that CPI will move back to their 2% target in early 2019 and reiterated core measures of inflation are anchored at this level.
While the BOC acknowledged that the U.S. economy has been robust, they also noted that elevated trade tensions with their North American neighbor remain a source of uncertainty. Emerging market concerns were also briefly mentioned but the odds of a spillover were downplayed.
On a more upbeat note, the statement indicated that business investment, export activity, employment, and consumption are on the rise. Of particular interest was the slight change in their conclusion from July’s statement that cited:
Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data.”
To this month’s statement that said:
“Recent data reinforce Governing Council’s assessment that higher interest rates will be warranted to achieve the inflation target.”
It’s also worth noting that they added a bit on NAFTA in their conclusion as well, citing that they are monitoring progress in trade talks and its potential impact on the inflation outlook.
###Germany-U.K. Brexit deal?
With Brexit negotiations ongoing, it’s no surprise that market watchers are eager to pounce on any new developments. Citing an unnamed source, Bloomberg reported that Germany and the U.K. are ready to drop key demands in order to shake on a transition deal.
The report indicated that people familiar with the matter shared that the top euro zone nation is ready to “accept a less detailed agreement on the UK’s future economic and trade ties with the EU in a bid to get a Brexit deal done.”
However, U.K. PM May’s spokespersonlater clarified that this was not the case. He said:
“We have always been clear that Parliament needs to be able to make an informed decision, and Parliament has also been clear on that. There is no change in that position.”
A spokesperson from the German government also said that no such change was made, stating:
“The government’s position is unchanged. The federal government has full trust in the leadership of Michel Barnier.”
Nothing to see here then, carry on! Still, it’s worth noting that “progress” updates like these, whether fake news or not, can result to big swings in price action. Just a reminder to practice proper risk management and keep close tabs on newswires when trading European currencies these days!
##Major Market Mover(s):
###EUR & GBP
The euro and the pound were extra jumpy during the session, popping sharply higher on rumors of a Brexit agreement between the U.K. and Germany.
Of course most these gains were just as quickly erased when spokespersons from both fronts clarified that their positions remain unchanged.
EUR/USD spiked 142 pips to a high of 1.1640 then retreated to 1.1608; EUR/JPY rallied close to 130.00 before falling back to 129.44; EUR/GBP tumbled from .9030 to a low of .8956 then scurried back to .9017.
GBP/USD popped up from 1.2821 to a high of 1.2983 then slumped to a low of 1.2873; GBP/JPY jumped from 143.08 to a high of 144.97 then slipped to 143.62; GBP/AUD hit a high of 1.8082 then dropped to 1.7912.
###CAD
The Loonie was in a weak spot against most of its currency rivals as NAFTA jitters appeared to outweigh some of the optimism from the BOC.
Trump said that the NAFTA “deal or no deal” situation should be known soon while Trudeau reiterated that Canada won’t sign a bad trade deal.
USD/CAD was stuck in its range just below the 1.3200 mark; CAD/JPY also moved sideways around 84.50, AUD/CAD is higher from .9445 to .9492, and EUR/CAD held on to its gains around 1.5325.
##Watch Out For:
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#U.S. Session Recap: Loonie Higher on Wilkins’ Remarks, JPY Advances
It was a relatively quiet day for most major currencies, even with noteworthy moves from the Loonie and yen.
Slightly more hawkish remarks from BOC official Wilkins caused quite a turnaround for the Loonie during the session while lingering trade concerns kept safe-havens supported.
U.S. Challenger job cuts up 13.7% in August, -4.2% previous
ADP non-farm employment change at 163K vs. 195K forecast, 217K previous
Canadian building permits dipped 0.1% vs. projected 1.1% gain
U.S. initial jobless claims down from 213K to 203K vs. 214K forecast
ISM non-manufacturing PMI up from 55.7 to 58.5 vs. 56.8 forecast
U.S. Markit final services PMI downgraded from 55.2 to 54.8
FOMC member Williams: No need to hike more quickly than gradual pace
Williams: Low wage growth still an issue, shows economy has room to run
Fed official Evans: Should hike ‘likely a bit beyond’ neutral
BOC Senior Deputy Gov. Wilkins: Discussed dropping ‘gradual approach’ to hikes
Wilkins: Higher rates will be warranted to achieve inflation target
Wilkins: NAFTA uncertainty deterring businesses from investing
##Major Events/Reports:
###Mixed U.S. jobs data
A handful of medium-tier U.S. employment reports were printed during the session, with most hinting at a slowdown in hiring for August.
First off, Challenger, Gray & Christmas reported that companies announced 38,427 in planned job cuts for the month, its third-highest figure for the year. As it turned out, this may be indicative of companies looking at global market conditions and making the necessary payroll adjustments.
In particular, industrial goods manufacturers led the layoffs, attributing most of these to tariffs, followed by consumer products manufacturers. On a less downbeat note, hiring announcements also ticked higher during the month, mostly coming from tech companies.
Next up, the August ADP non-farm employment change reading landed at 163K, lower than the forecast at 195K and the earlier 215K increase. The services sector led the gains, adding 139K jobs for the month, while the goods-producing sector contributed 24K in hiring.
This report revealed that employment gains were seen throughout most industries, except the natural resources and mining sector that shed 1K jobs last month.
Lastly, the ISM non-manufacturing PMI beat expectations by surging from 55.7 to 58.5, outpacing the consensus at 56.8. Components of the report revealed that the employment sub-index rose from 56.1 to 56.7 during the period, reflecting a faster pace of increase.
Furthermore, business production was responsible for most of the pickup as the reading rose from 56.5 to 60.7. New orders, supplier deliveries, and the backlog of orders were also notably higher in August.
##Major Market Mover(s):
###CAD
The Loonie was actually off to a shaky start as another day in crude oils weighed on the correlated Canadian currency. However, the tide turned when BOC official Wilkins shared that policymakers actually discussed changing their gradual approach to hiking.
USD/CAD initially climbed to a high of 1.3227 before tumbling sharply to a low of 1.3128; CAD/JPY was down to a low of 83.75 before it popped up to 84.45; EUR/CAD is down to 1.5282; and GBP/CAD fell back to the 1.7000 mark.
##Watch Out For:
11:30 pm GMT: Japanese household spending (-0.9% expected, -1.2% previous)
11:50 pm GMT: Japanese average cash earnings (dip from 3.3% to 2.4% expected)
1:30 am GMT: Australian home loans (-0.1% dip expected, -1.1% previous)
5:00 am GMT: Japanese leading indicators (drop from 104.7% to 103.5% expected)
This post first appeared here:
Just when it seemed the pound was in for a rough ride from developments in the earlier session, it got a strong boost when Barnier seemed to extend the deadline for a Brexit deal.
U.S. consumer credit grew from $8.5B to $16.6B vs. $14.5B forecast
EU chief Brexit negotiator Barnier: Deal within 6-8 weeks is “realistic”
EU special summit on Brexit set for November 13?
FOMC voting member Bostic: Inflation could pick up on higher tariffs
Bostic: Trade dispute causing uncertainty, pause in business investment
White House open to another meeting between Trump and North Korea
With Brexit talks still ongoing and the deal deadline fast-approaching, it’s no surprise that pound traders are paying extra close attention to comments from top negotiators.
EU chief negotiator Barnier already spurred a pound rally a few days back when he floated the idea of a customized Brexit deal. This time, he signaled that the bloc might be willing to wait a little longer for an agreement to be hammered out.
In a business forum in Slovenia, Barnier mentioned:
“I think that if we are realistic we are able to reach an agreement on the first stage of this negotiation which is the Brexit treaty within six or eight weeks.”
Recall that many are seeing the October EU Summit as the deadline for an agreement, which means that the U.K. risks a “no deal” Brexit if they don’t come to terms with the EU by then. His remarks suggest that they’re giving PM May a bit more leeway until the second week of November.
Barnier explained that this timeline takes into account the period for ratification from both the U.K. House of Commons and European parliament. Word through the grapevine is that the EU is mulling a special Brexit Summit on November 13 as well.
The lack of any other economic catalysts during the session left markets ending on a mixed note, although there were some signs of risk-taking.
Dow 30 index is down 59.47 points to 25,857.07 (-0.23%)
S&P 500 index is up 5.45 points to 2,877.13 (+0.19%)
Nasdaq is up 21.62 points to 7,924.16 (+0.17%)
Gold and crude oil, on the other hand, closed the session in the red.
The precious metal dipped to $1,195.01 per troy ounce (-0.08%)
WTI crude oil fell to $67.52 per barrel (-0.35%)
Pound bulls charged when Barnier’s remarks once again reflected more flexibility from the EU in coming up with a Brexit deal.
GBP/USD jumped from 1.2933 to a high of 1.3052, GBP/JPY rallied from 143.75 to a high of 145.03, EUR/GBP dropped from .8952 to a low of .8895, and GBP/AUD climbed past the 1.8300 mark.
The Swiss franc returned some of its earlier gains, possibly as traders moved their funds to other European assets. A bit of risk appetite and profit-taking also came in play.
USD/CHF pulled up from .9733 to a high of .9755, EUR/CHF advanced from 1.1268 to a high of 1.1315, GBP/CHF bounced off 1.2599 to a high of 1.2706, and CHF/JPY retreated to the 114.00 handle.
1:30 am GMT: Australian NAB business confidence (previous reading of 7)
4:30 am GMT: Japanese tertiary industry activity index (0.1% rebound from earlier 0.5% drop expected)
6:00 am GMT: Japan’s preliminary machine tool orders (13.1% previous)
This post first appeared here:
A reversal of fortunes from earlier trading sessions took place as New York session traders seem pleased about developments in key issues like trade and Brexit.
The lower-yielding yen returned most of its previous gains against its rivals, particularly the Loonie which got an extra kick higher from Trump’s NAFTA remarks.
U.S. NFIB Small Business Index up from 107.9 to 108.8
Canadian housing starts dipped from 206K to 201K vs. 213K forecast
U.S. final wholesale inventories at 0.6% vs. 0.7% forecast
U.S. JOLTS job openings up from 6.82M to 6.94M vs. 6.68M consensus
Trump: Trade talks with Canada going well
Trump: Ottawa very much wanted to make a deal
WSJ report: Official assures U.S. firms their mainland operations won’t be targeted
Risk-off flows eased for the most part of the session as traders appeared to turn their focus to positive developments instead. Wall Street was in a cheery mood as tech and energy sector gains allowed
equity indices to close in the green.
Dow 30 index is up 113.99 points to 25,971.06 (+0.44%)
S&P 500 index is up 10.76 points to 2,887.89 (+0.37%)
Nasdaq is up 48.31 points to 7,972.47 (+0.61%)
U.S. bond yields were also notably higher, likely supported by stronger than expected medium-tier data highlighting the possibility of another Fed hike later this month.
U.S. 2-year yield is up to 2.7479%
U.S. 5-year yield is up to 2.8688%
U.S. 10-year yield is up to 2.9773%
Commodities were also in positive territory, with crude oil getting a boost from a larger than expected draw in API stockpiles.
Market watchers had been on edge for the most part of the day as it has been reported that China asked the WTO for permission to impose sanctions on the U.S.
However, some of these concerns appear to have been eased when a WSJ report revealed that the Chinese President’s chief of economic policy, Liu He, has assured American business owners that their operations in the mainland won’t be targeted in any retaliatory measures.
These remarks were made in a meeting with U.S. business executives last month where Liu He emphasized that they won’t allow retribution to foreign companies, according to people briefed on the event.
Although U.S. President Trump repeated that they are taking a tough stance on China, he also mentioned that trade talks with Canada are going well and that Ottawa very much wanted to make a deal.
Sources familiar with NAFTA negotiations later on shared that Canada is willing to give the U.S. limited access to its dairy market in order to move forward with talks.
Keep in mind that this one of the key issues on the table, so this potential concession might be a good compromise and could improve the odds of sealing the deal by October 1.
After a strong run in the previous session, the yen gave up most of its safe-haven gains to fall behind the rest of its peers.
USD/JPY recovered from 111.39 to a high of 111.64; EUR/JPY is up from a low of 128.78 to a high of 129.55; GBP/JPY climbed back to 145.48; and AUD/JPY is back up to the 79.50 area.
The Loonie left its rivals eating dust towards the end of the session, thanks to positive NAFTA remarks from the POTUS himself.
USD/CAD retreated from a session high of 1.3173 to a low of 1.3042; CAD/JPY popped up from 84.65 to a high of 85.57; EUR/CAD slipped from 1.5237 to 1.5148; and GBP/CAD is back down to the 1.7000 handle.
11:50 pm GMT: Japanese BSI manufacturing index (rebound from -3.2 to +8.0 eyed)
12:30 am GMT: Australia’s Westpac consumer sentiment (-2.3% previous)
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The Aussie held on to its gains from the earlier session and went for more as the U.S. will reportedly pursue another round of trade talks with China.
Meanwhile, the Loonie also drew support from trade-related updates, with a NAFTA deal expected to be signed, sealed, delivered soon.
The Greenback was mostly weaker throughout the session, shrugging off hawkish remarks from Brainard on account of downbeat PPI and risk-on flows.
U.S. headline PPI down 0.1% vs. projected 0.2% gain in August
U.S. core PPI also down 0.1% vs. estimated 0.2% uptick, previous 0.1% gain
EIA crude oil inventories fell 5.3M barrels vs. projected 1.3M reduction
FOMC member Brainard: Fed has room to tighten “over the next year or two”
Guajardo: Mexico’s NAFTA negotiator on his way to Washington
WSJ: U.S. officials sent invitation to China for another round of trade talks
The August PPI report revealed that producer prices in the U.S. dipped for the first time in over a year. Headline and core readings both posted 0.1% declines versus expectations of 0.2% gains.
These were also weaker compared to July figures, which had a flat reading for the headline PPI and a 0.1% uptick for the core version. Components of the latest report indicated that the drop was mostly due to lower prices of food and a range of trade services.
On a year-over-year basis, this translates to a 2.8% reading for August, down from July’s 3.3% figure. Since producers tend to pass on price changes to consumers, this could imply downside pressures on overall inflation in the months ahead.
In a speech on economic outlook and monetary policy at the Detroit Economic Club Luncheon, FOMC voting member Lael Brainard remarked that the Fed has room to tighten “over the next year or two.”
Brainard pointed to fiscal stimulus from the Trump administration as support for the neutral level of rates, which then gives the central bank wiggle room for lifting the benchmark rate further without derailing growth.
She also cited that the labor market is strong and inflation is near the Fed’s 2% goal, making further gradual rate hikes appropriate in the next year or two.
Keep in mind that the latest set of FOMC forecasts suggests three hikes for this year, although many market participants expect four. The Fed is gearing up to release its updated forecasts in this month’s statement.
Another day, another set of NAFTA talks! It’s back to the grind for Canadian Foreign Minister Freeland, who is said to be ready to return to Washington this Thursday to continue negotiations for a trade deal.
According to a source familiar with the matter, there will probably be “several more sessions” needed to hammer out an agreement and that Canada doesn’t feel “any tremendous pressure to get it done in the
immediate short term.”
Still, the source added that negotiations have been “more constructive” and that an optimistic scenario would be to get a deal “in principle” by next week.
As in his previous statements, Canadian PM Trudeau reiterated in a testimony in front of Liberal Party lawmakers that they’d rather have no NAFTA deal than sign a bad one.
On the Mexican front, it has been reported that the country’s chief NAFTA negotiator is also heading back to Washington. Some believe that this hints that a trilateral deal might be ready for his go-signal while others think that Mexico might push forward with its bilateral deal with the U.S. instead.
Mexican Economy Minister Ildefonso Guajardo noted that Canada being on board would be a “great asset” but added:
“Now, if at the end we see that the scenario, which we don’t expect, but can’t be ruled out, is that there is not an agreement, Mexico has to take the next step – a bilateral accord, if it’s necessary.”
The Aussie was able to finish strong, thanks to another boost from reports that the U.S. is ready to pursue more trade talks with China.
The WSJ reports that U.S. Treasury Secretary Mnuchin’s office sent an invitation to top Chinese officials for trade negotiations later this month.
AUD/USD jumped from .7115 to a high of .7182 and held its ground for the rest of the session; AUD/JPY popped up to the 80.00 mark then retreated slightly to 79.80; EUR/AUD slipped from 1.6276 to a low of 1.6196, and GBP/AUD fell to a low of 1.8223.
The Loonie was also able to squeeze out some gains, except against the Aussie and Kiwi, on optimism that NAFTA talks could produce a deal soon.
USD/CAD fell from 1.3076 to a low of 1.2980 before pulling up to 1.2997; CAD/JPY advanced from a low of 85.08 to a high of 85.82; EUR/CAD slid further to a low of 1.5094, and CAD/CHF is up to .7463.
11:50 pm GMT: Japanese core machinery orders m/m (5.6% rebound from earlier 8.8% drop expected)
11:50 pm GMT: Japan’s PPI y/y (no change from 3.1% expected)
1:00 am GMT: Australia’s MI inflation expectations (previous reading of 4.0%)
1:30 am GMT: Australian employment change (16.5K increase expected, -3.9K previous)
1:30 am GMT: Australia’s unemployment rate (no change from 5.3% expected)
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Euro bulls jumped on Draghi’s slightly more upbeat tone during the ECB presser, focusing on the improved inflation outlook and shrugging of downgraded GDP forecasts.
U.S. headline CPI at 0.2% vs. 0.3% consensus in August, 0.2% previous
U.S. August core CPI at 0.1% vs. 0.2% consensus, 0.2% previous
Year-over-year U.S. headline CPI at 2.7% vs. 2.8% projected
U.S. initial jobless claims dipped from 205K to 204K vs. 210K estimate
USDA looking into another round of tariffs aid for farmers in Dec
U.S. House panel voted to make individual tax cuts permanent
IEA highlighted risks from emerging economies on crude oil market
ECB downgraded 2018 and 2019 GDP forecasts, inflation estimates unchanged
ECB head Draghi: Spillover risks from Turkey and Argentina not substantial
Draghi also downplayed potential spillover from Italy’s politics
Draghi: We haven’t changed the balance of risks to growth
FOMC member Bostic: Rate hikes can continue for a handful of quarters
Bostic: Trade risks could dampen investment but had limited effect so far
BOE head Carney: Cannot cut rates to offset a “no deal” Brexit
In the earlier session, the ECB announced their decision to keep monetary policy unchanged for the time being. As it turned out, the euro party was just getting started as the central bank had yet to print their updated economic forecasts and hold a press conference.
First up, here are their updated growth and inflation forecasts for 2018 and the next couple of years:
2018 GDP forecast downgraded from 2.1% to 2.0%
2019 GDP forecast downgraded from 1.9% to 1.8%
2020 GDP forecast unchanged at 1.7%
2018-2020 HICP (inflation) forecast unchanged at 1.7%
Under usual circumstances this might’ve led to a dip in the euro, but some point to the leak earlier in the week as the reason why the shared currency barely reacted to the growth downgrades.
Besides, market watchers likely put more focus on the unchanged inflation forecasts as Draghi’s tone on this topic during the presser was a tad more upbeat. He also emphasized that they haven’t changed their balance of risks to growth.
Furthermore, Draghi cited that they expect stronger core inflation, explaining that lower growth doesn’t necessarily mean lower price levels, saying:
“The underlying strength of the economy continues to support our confidence that the sustained convergence of inflation to our aim will proceed and will be maintained even after a gradual winding down of our net asset purchases…”
The ECB head honcho also sounded confident that the region would be able to weather any troubles from emerging markets or Italian politics. In particular, he emphasized that spillovers from Turkey or Argentina haven’t been substantial. While he acknowledged that there has been some political damage in Italy, he assured that there haven’t been spillovers in the greater euro area.
Uncle Sam’s inflation readings turned out weaker than expected for August, with the headline CPI up 0.2% versus the 0.3% consensus and the core CPI up 0.1% versus the 0.2% estimate.
Components of the August CPI report revealed that healthcare and apparel prices slipped but some of the losses were offset by higher costs of gasoline and shelter. On a year-over-year basis, headline inflation is down from 2.9% to 2.7% versus the estimate at 2.8%.
The mood in Wall Street was also mostly positive as folks still seemed giddy about the shiny new things Apple unveiled the previous day.
Fiscal policy factors may have also lifted investors’ spirits. A Republican-led House panel backed a bill to make individual tax cuts permanent (More disposable income, yay!) and the USDA released a white paper on another set of aid for farmers hit by tariffs.
Dow 30 index is up 147.07 points to 25,145.99 (+0.57%)
S&P 500 index is up 15.26 points to 2,904.18 (+0.53%)
Nasdaq is up 59.48 points to 8,013.71 (+0.75%)
Crude oil, on the other hand, had a rough session as the IEA warned that emerging market troubles and trade tensions are weighing on their demand outlook. According to the agency:
“As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the U.S. dollar, raising the cost of imported energy. In addition, there is a risk to growth from an escalation of trade disputes.”
WTI crude oil is down to $68.74 per barrel (-2.32%)
Brent crude oil slipped to $78.18 per barrel (-2.01%)
Adding more downside pressure on commodities was Trump’s tweet on being under no pressure to strike a deal with China. So much for the optimism on another round of higher-level talks!
The POTUS shared plans to rebrand NAFTA to USMC, which stands for U.S.-Mexico-Canada… and also U.S. Marine Corps. Not confusing at all. Speaking to Republican donors at a private fundraiser, he also reportedly threatened to drop the “C” if they don’t agree with his changes.
The euro got a strong boost as ECB head Draghi drew traders’ attention to strong underlying momentum and brushed off potential contagion effects.
EUR/USD popped up from 1.1619 to a high of 1.1702; EUR/JPY is up from 129.58 to a high of 130.93; EUR/AUD is up to 1.6261, and EUR/NZD rebounded from 1.1743 to 1.7816.
The lower-yielding yen shed ground across the board, carrying on with its slide from earlier sessions. USD/JPY advanced from 111.45 to 112.04; GBP/JPY climbed from 145.48 to a high of 146.71; AUD/JPY reached a high of 80.79; NZD/JPY rallied to 73.68, and CAD/JPY is up to 86.20.
2:00 am GMT: Chinese fixed asset investment ytd/y (no change from 5.5% expected)
China’s industrial production y/y (no change from 6.0% expected)
Chinese retail sales y/y (no change from 8.8% expected)
4:30 am GMT: Japanese revised industrial production
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The North American currencies, namely the Greenback and the Loonie, found themselves at the bottom of the forex pile on account of trade troubles.
In particular, the looming announcement of a fresh batch of tariffs on Chinese imports convinced traders to dump the U.S. dollar. Meanwhile, the lack of progress in NAFTA seems to have worn Loonie bulls out.
Canadian foreign securities purchases up from 10.3B CAD to 12.65B CAD
U.S. Empire State manufacturing index slumped from 25.6 to 19.0 vs. 23.2 forecast
U.K. CB leading index posted another 0.2% drop in July
Australian CB leading printed another 0.1% uptick in July
U.S. next round of tariffs on $200B Chinese imports effective Sept. 24
U.S. tariffs rate on this set to go up from 10% to 25% by end of year
Trump threatens $267B more in tariffs if China retaliates
Uncle Sam has officially fired yet another shot in the ongoing trade war with China, imposing a new set of tariffs on roughly $200 billion worth of Chinese imports. These tariffs, currently set at 10%, will take effect on September 24 and will be increased to 25% by the end of the year.
Wondering how much both countries now have at stake? Here’s a quick primer on the U.S.-China trade war by my buddy Forex Gump.
The latest announcement wasn’t much of a surprise, although the buildup did spur a slow grind lower for U.S. assets. After all, this would bring even more uncertainty for businesses as China would likely make the next move.
And if they do, the POTUS is threatening to slap another set of tariffs on $267 billion more Chinese goods. Oh, joy.
Market participants were unable to keep up their jolly spirits from the earlier trading session as the spotlight returned to trade tensions. U.S. equity indices closed in the red, with some of the losses also resulting from steep declines in tech shares:
Dow 30 index is down 92.55 points to 26,062.12 (-0.35%)
S&P 500 index is down 16.18 points to 2,888.80 (-0.56%)
Nasdaq is down 114.25 points to 7,895.79 (-1.43%)
Gold inched higher as the precious metal took advantage of dollar weakness while crude oil dipped. Expectations of output adjustments from the OPEC-Russia meeting next weekend might also be in play.
Gold rose $7.46 to $1,200.96 per troy ounce (+0.63%)
WTI crude oil is down $0.25 to $68.74 per barrel (-0.36%)
The scrilla crawled lower leading up to the official announcement of more U.S. tariffs on China, which the Donald said was due at the end of the session. It didn’t help the dollar that the Empire State manufacturing index disappointed.
USD/JPY sank from 112.03 to 111.70, EUR/USD climbed from 1.1661 to a high of 1.1699 then retreated to 1.1683, GBP/USD reached a high of 1.3166, and USD/CHF slipped to a low of .9611.
The Loonie also found itself sitting on the losers’ bench as Canada was dealing with trade issues of its own and crude oil was also in the red.
Optimism for seeing a NAFTA deal anytime soon appears to have faded, with Freeland saying that there is no formal date for talks this week yet.
USD/CAD found support around the 1.3000 handle then bounced to a high of 1.3043, CAD/JPY sank from 86.02 to a low of 85.85, EUR/CAD climbed from 1.5184 to a high of 1.5239, and GBP/CAD is up to 1.7173.
1:30 am GMT: RBA monetary policy meeting minutes (Review their rate decision here!)
1:30 am GMT: Australia’s HPI q/q (another 0.7% drop expected)
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Dollar price action was mixed, but the comdoll gang was able to put up a good fight despite retaliatory trade measures from China.
China responds with 5-10% tariffs on $60 billion U.S. goods
Canadian manufacturing sales up 0.9% vs. 1.0% consensus
U.S. NAHB housing market index unchanged at 67 vs. 66 forecast
New Zealand GDT auction yielded 1.3% drop in dairy prices after 0.7% fall
NZ Westpac consumer sentiment index down from 108.6 to 103.5
U.K. PM May: “Withdrawal agreement is virtually agreed”
API crude oil stockpiles up 1.25M barrels vs. expected 2.5M drop
After a lot of tough talk in the earlier sessions, Chinese officials showed that their bark is worse than their bite by imposing 5-10% in tariffs on $60 billion worth of U.S. goods also set to take effect on September 24.
These trade duties will be levied on more than 5,000 U.S. imports, including meat, nuts, alcoholic drinks, chemicals, clothes, machinery, furniture and auto parts.
But apart from being considerably lower compared to the $200 billion in Chinese goods targeted by the U.S. in the latest salvo, the tariffs rate was also below the 10-20% that most market participants feared.
Keep in mind that the U.S. also imposed a lower-than-expected rate of 10% versus the expected 25%, only increasing it to this level by the end of the year if China doesn’t cooperate.
Investors saw this as a sign that both countries are giving each other a bit more leeway before putting more power in their trade punches. ICYMI, here’s a rundown of their earlier tariffs.
Even with trade war shots being fired on both fronts, the higher-yielding Australian dollar managed to dodge any bullets and score some wins. Lower-than-expected tariffs were seen to be a sign that the U.S. and China might temper their tone and avoid causing further damage to the commodity sector.
AUD/USD advanced from .7203 to a high of .7235; AUD/JPY popped back up to the 81.00 levels at a high of 81.21; EUR/AUD slipped from 1.6251 to 1.6154, and GBP/AUD is down to 1.8217.
The Kiwi and Loonie were also among the better-performers of the day, with the former shrugging off another decline in dairy prices and the latter brushing off a surprise build in API oil stockpiles.
NZD/USD fell to a low of .6586 then recovered to .6598; NZD/JPY is up from 73.92 to a high of 74.12; EUR/NZD retreated from a high of 1.7781 to 1.7720, and GBP/NZD is down from 1.9994 to 1.9946.
USD/CAD slid further from 1.3024 to 1.2975; CAD/JPY climbed from 86.08 to a high of 86.62; EUR/CAD is down to 1.5149; and GBP/CAD dropped to 1.7082.
11:50 pm GMT: Japanese trade balance (deficit to widen from 0.05T JPY to 0.14T JPY)
12:30 am GMT: Australia’s MI leading index (previous reading came in flat)
1:30 am GMT: RBA Assistant Gov. Kent’s testimony
Tentative: BOJ monetary policy statement (Here’s what to expect!)
Tentative: BOJ press conference
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Risk-on vibes from the earlier trading session carried on throughout U.S. hours, lifting the commodity currencies even higher.
On the flip side, the Swiss franc found itself behind the pack as traders might be adjusting positions ahead of the SNB decision, but clawed back some gains later on.
U.S. building permits down from 1.30M to 1.23M vs. 1.31M forecast
U.S. housing starts up from 1.17M to 1.28M vs. 1.24M forecast
EIA crude oil stockpiles down 2.1M barrels vs. projected 2.7M drop
New Zealand Q2 GDP at 1.0% vs. 0.8% consensus, 0.5% previous
The spotlight was still on Brexit as the U.S. session rolled along. Pound pairs were already off to a shaky start owing to rumors that PM May will reject the EU proposal, and it didn’t help that European Commission President Juncker remarked that they are still “far away” from a deal.
No. 10 herself sounded a bit more optimistic, citing that the EU would also need to make adjustments in order to strike a deal. Furthermore, PM May urged the Labour party to stop pushing for a second referendum, reiterating:
“I want to be absolutely clear – this government will never accept a second referendum.”
This was echoed by Brexit secretary Raab, who wrote an open letter to his Labour counterpart, challenging their party to clarify their position.
Meanwhile, in a recorded clip for broadcasters at the summit, Chancellor Hammond suggested that PM May bypass Barnier and talk to EU leaders directly instead.
On a slightly more positive note, European Council President Tusk confirmed that there would be a special Brexit summit in November to finalize a deal. He did admit that time was running out but sounded confident that the talks are entering “a decisive phase,” even as he pointed out that some U.K. proposals “will need to be reworked and further negotiated.”
The mood in Wall Street was still a positive one, as traders caught up to softer-than-expected tariffs from China and easing trade war jitters.
Dow 30 index is up 158.80 points to 26,405.76 (+0.61%)
Nasdaq is down 6.07 points to 7,950.04 (-0.08%)
S&P 500 index is up 3.64 points to 2,907.95 (+0.13%)
Both gold and crude oil were able to chalk up gains for the session, with the latter getting another lift from a larger-than-expected draw in U.S. stockpiles.
The precious metal advanced to $1,204.01 per troy ounce
WTI crude oil is up to $71.13 per barrel
This comdoll tandem raced ahead of the forex pack, taking advantage of risk-on flows mostly on easing concerns about the trade war. The Kiwi also got a late boost from stronger-than-expected Q2 GDP.
AUD/USD is up from .7251 to a high of .7276; AUD/JPY bounced off the 81.50 area to a high of 81.65; EUR/AUD retreated below the 1.6100 handle, and GBP/AUD is down to 1.8103.
NZD/USD jumped to a high of .6652; NZD/JPY climbed from 74.03 to a high of 74.65; EUR/NZD slipped to a low of 1.7541, and GBP/NZD dipped below the 1.9800 mark.
The Swiss currency continued to slide against its most of its peers as market participants may be adjusting their positions as the SNB decision drew near. Or could it be the SNB themselves starting to sneak up on the franc?
EUR/CHF crept from 1.1296 to a high of 1.1327 before dipping back to 1.1290; CAD/CHF is up from .7458 to a high of .7501; AUD/CHF rose from .7004 to a high of .7038, and CHF/JPY is down to 116.12.
1:30 am GMT: RBA Bulletin
7:30 am GMT: SNB monetary policy decision
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Risk appetite extended its stay throughout the U.S. session, lifting a couple of stock indices to new record highs and pulling safe-havens back.
The higher-yielding Kiwi found itself in the top spot, followed by the euro and pound, while the dollar and yen lagged behind.
Canadian ADP non-farm employment change at 13.6K, 35.5K previous
U.S. Philly Fed manufacturing index up from 11.9 to 22.9 vs. 17.5 expected
U.S. initial jobless claims down from 204K to 201K vs. 210K forecast
Euro zone consumer confidence index dipped from -2 to -3
U.S. existing home sales unchanged at 5.36M vs. 5.38M conensus
New Zealand visitor arrivals jumped 2.8% after earlier 0.7% uptick
ECB’s Praet: Economy expanding above potential
Praet: Sustained convergence to inflation target will proceed
Tusk: October 18 EU Summit will be “moment of truth” for Brexit talks
Tusk: “Little bit more optimistic” that a Brexit deal will be struck
PM May: Agreed with Tusk on need for backstop and free flow of goods
PM May: Only workable proposal for Irish backstop is from the U.K.
French President Macron: “Chequers plan cannot be take it or leave it.”
Italy’s Di Maio to quit coalition if budget demands not met?
In the latest episode of Italy’s political drama series, 5-Star Movement’s Luigi Di Maio threatened to throw in the towel if his political party’s spending demands for 2019 are not met, declaring:
“If we do not find the resources we better go home. It is useless to chug along.”
However, Di Maio’s spokesperson later on clarified that this wasn’t a threat to pull the 5-Star Movement out of the coalition, adding that the government remains united in drafting its spending plans.
Keep in mind that the budget deadline on September 27 is fast-approaching, which means Economy Minister Tria is under a lot of pressure to set growth, deficit and debt targets for next year while meeting political party demands and EU requirements. Here’s why this is a huge deal for Italy and the euro.
It looks like EU leaders are still in a deadlock when it comes to Brexit talks, with neither side refusing to let up on the Irish border backstop issue. Here are some highlights from the press conferences of European Council President Tusk and U.K. Prime Minister May during the summit:
Tusk clarified that there would be no Brexit deal without any clear and workable solution on the Irish border issue, echoing Merkel’s remarks that the single market must be protected. He also pointed out:
“Everybody shared the view that while there are positive elements in the Chequers proposal, the suggested framework for economic cooperation will not work, not least because it risks undermining the single market.”
Furthermore, Tusk doused rumors that a November special Brexit summit has been set, clarifying that the “moment of truth” for talks is on the October pow-wow.
In response to questions from reporters, Tusk noted that he is “a little bit more optimistic” when it comes to negotiations but that a “no deal” scenario is still possible.
As for Prime Minister May, she mentioned that she agrees with Tusk on the need for an Irish backstop plan and the frictionless movement of goods. However, she reiterated that the Chequers proposal is the only one that can deliver these, citing:
“There’s no counter proposal that delivers a good deal: that respects both the integrity of the United Kingdom and respects the vote of the British people.”
May repeated that they do want to reach an agreement but are prepared for a “no deal” scenario. She also expressed hopes that this can be a done deal by October.
Wall Street was in a positive mood, with tech sector gains buoying the Dow and S&P to new record highs.
Dow 30 index is up 255.96 points to 26,661.72 (+0.97%)
S&P 500 index is up 24.63 points to 2,932.58 (+0.55%)
Nasdaq is up 78.19 points to 8,028.23 (+0.98%)
Gold was slightly higher, possibly taking advantage of dollar weakness, while crude oil dipped.
The precious metal is up to $1,207.62 per troy ounce (+0.31%)
WTI crude oil is down to $70.80 per barrel (-0.32%)
The lower-yielding yen lagged further behind its forex peers as risk-taking remained supported and U.S. bond yields were higher.
USD/JPY bounced off a low of 112.04 to a high of 112.59; EUR/JPY popped up from 131.50 to 132.48; GBP/JPY advanced from 148.21 to a high of 149.28, and AUD/JPY rallied to a high of 82.03.
The Kiwi snatched the lead during the risk-on session, overtaking the Aussie and Loonie while taking advantage of dollar weakness as well.
NZD/USD is up from .6653 to a high of .6694; NZD/JPY jumped from 74.75 to a high of 75.25; EUR/NZD slipped to a low of 1.7541, and GBP/NZD is down to 1.9816.
The Loonie retreated against most of its peers, except against the yen and pound, during the session as NAFTA talks also seem to be stalling on the auto tariffs issue.
USD/CAD pulled up from 1.2884 to a high of 1.2928 but fell back to 1.2904; EUR/CAD is up from 1.5113 to a high of 1.5211; AUD/CAD is up from .9379 to .9415, and NZD/CAD is up to .8641.
11:30 pm GMT: Japanese national core CPI y/y (gain from 0.8% to 0.9% expected)
12:30 am GMT: Japanese flash manufacturing PMI (53.1 expected, 52.5 previous)
3:00 am GMT: New Zealand credit card spending (3.2% previous)
4:30 am GMT: Japanese all industries activity index (0.2% rebound from earlier 0.8% dip expected)
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Draghi wasn’t his usual downbeat self during his latest testimony, with his relatively upbeat remarks on inflation spurring a pop higher for the euro.
The pound stalled from its climb as it took a few more Brexit-related jabs throughout the day but managed to hold on to most of its earlier gains. Meanwhile, the dollar wobbled slightly on political headlines but also ended positive.
Canadian wholesale sales up 1.5% vs. projected 0.4% uptick
Belgian NBB business climate index up from -0.3 to +1.2 vs. -0.5 consensus
ECB head Draghi: Tighter labor market led to shortages in some areas
Draghi: Pickup in wage growth and domestic cost pressures to continue
Draghi: Broad-based economic expansion ongoing
U.S. Deputy Attorney General Rod Rosenstein to step down?
In the absence of major economic releases during the session, all eyes and ears were mostly on ECB head honcho Draghi’s speech before the European Parliament Economic and Monetary Affairs Committee in Brussels.
Market watchers took note of his more upbeat take on the jobs situation and particularly on inflation. Draghi highlighted the tightening labor market how this is resulting to shortages in some areas. He also mentioned that wage growth will likely continue, leading to rising domestic price pressures.
With this in mind, Draghi pointed out that even though headline inflation figures have been cruising at current levels, there has been “a relatively vigorous pick-up in underlying inflation.”
Of course this improved inflation outlook has already been reflected in the ECB statement and updated projections earlier on, but euro bulls likely jumped on the emphasis by the main man himself.
Some jitters from U.S. political drama came into play as headlines reported that U.S. Deputy Attorney General Rod Rosenstein was on his way to the White House. This fueled rumors that he would announce his resignation before the Donald could even say “You’re fired!”
Rosenstein oversees the special counsel investigation into Russia’s alleged involvement in the 2016 U.S. elections. Many worry that his likely replacement might make matters all the more complicated for the Mueller probe.
Later on it was clarified that the actual meeting between Rosenstein and Trump would be on Thursday.
Even though risk-on flows kicked into high gear after trade measures announced by the U.S. and China last week turned out softer than expected, there were some notable wobbles in the market as the tariffs kicked in on Monday.
Dow 30 index fell 181.45 points to 26,562.05 (-0.68%)
S&P 500 index is down 10.30 points to 2,919.37 (-0.35%)
Nasdaq is up 6.29 points to 7,993.25 (+0.08%)
Crude oil, however, managed to scrape some gains as the OPEC refrained from increasing output to keep a lid on prices.
WTI crude oil is up to $72.28 per barrel (+2.12%)
Brent crude oil advanced to $81.47 per barrel (+3.39%)
The shared currency enjoyed a sharp move higher thanks to Draghi reiterating the ECB’s more upbeat inflation outlook. However, it promptly returned most of these gains as traders must be feeling anxious ahead of Italy’s budget release.
EUR/USD popped from 1.1763 to a high of 1.1815 then retreated to 1.1744; EUR/JPY advanced from 132.45 to a high of 133.06 then slipped to 132.45; EUR/GBP pulled up from .8935 to a high of .8981 then fell back to .8961.
The dollar had a mostly positive run during the session, even as it wobbled on headlines suggesting that Rosenstein might leave his post.
USD/JPY hit a low of 112.43 then advanced to 112.84; GBP/USD fell from 1.3151 to 1.3111; USD/CHF climbed from .9580 to a high of .9650; and AUD/USD slipped to .7253.
11:50 pm GMT: BOJ monetary policy meeting minutes (Review the latest BOJ decision here!)
5:35 am GMT: BOJ Governor Kuroda’s testimony
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U.S. consumer confidence surged to its highest level since the year 2000 yet dollar bulls seem to be treading carefully ahead of the FOMC decision. Sterling was able to hold on to most of its gains from the earlier session.
U.S. house price index up 0.2% as expected, 0.3% previous
U.S. CB consumer confidence index jumped to 138.4 vs. 132.2 forecast in Sept
Aug CB consumer confidence index upgraded to 134.7 in Aug
Richmond manufacturing index up from 24 to 29 vs. 22 forecast
U.S. official: Canada not making dairy concessions needed for NAFTA deal
Italy’s Di Maio threatened not to back 2019 budget
New Zealand trade deficit widened from 196M NZD to 1484M NZD
Uncle Sam printed impressive figures a day ahead of the highly-anticipated September FOMC decision, with consumer confidence surging close to its highest levels since Y2K was still a thing.
The consumer confidence index as measured by the Conference Board (CB) for the current month jumped to 138.4 versus expectations of a dip to 132.2. To top it off, the August figure also enjoyed an upgrade to
134.7.
Components of the report revealed that the gains were mostly from a jump in the expectations index from 109.3 to 115.3. Optimism for business conditions in the near term also improved, along with expectations for labor market conditions.
Now this leading indicator is a pretty big deal since stronger consumer confidence usually buoys spending, which then accounts for a huge chunk of overall economic growth. This also suggests that Americans are shrugging off potential repercussions from trade tensions and might be gearing up for a shopping spree in the upcoming holiday season instead.
The clock is winding down for a NAFTA deal to be reached, but it looks like negotiations aren’t making much progress. According to a top U.S. official, Canada is refusing to make the necessary concessions to strike an agreement.
However, Canadian Foreign Minister Freeland’s spokesperson dismissed these allegations, adding:
“Our focus is the substance, not timelines. We will continue to negotiate with a view to getting a deal that is in Canada’s national interest.”
Lighthizer suggested that they might first move forward with Mexico then just add Canada in the deal later on.
U.S. equities appear to be prepping for a widely expected Fed interest rate hike in this week’s statement and also reacting to Trump’s tough talk on how the U.S. “will not tolerate such abuse” on trade.
Dow 30 index fell 69.84 points to 26,492.21 (-0.26%)
S&P 500 index is down 3.81 points to 2,915.56 (-0.13%)
Nasdaq is up 14.22 points to 8,007.47 (+0.18%)
The POTUS also made a few jabs to the OPEC for not acting to rein in higher oil prices, but Black Crack still managed to squeeze out a few more gains.
WTI crude oil rose to $72.29 per barrel (+0.28%)
Brent crude oil rose to $81.87 per barrel (+0.83%)
Pound pairs were able to add to their gains from the earlier trading session as Brexit optimism peeked back in the markets. Word through the forex grapevine is that the EU might be open to free trade but with a customs border.
GBP/USD climbed from 1.3163 to a high of 1.3194; GBP/JPY advanced from 148.50 to a high of 149.02; EUR/GBP dipped to .8926, and GBP/AUD is up to 1.8180.
1:00 am GMT: New Zealand ANZ business confidence index (-50.3 previous)
5:00 am GMT: BOJ core CPI y/y (uptick from 0.5% to 0.6% expected)
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The Greenback tossed and turned during the FOMC announcement as the statement was initially thought to be a dovish hike before Powell clarified their policy stance during the presser.
The Kiwi also whipped around on the RBNZ decision, even as the central bank sat on its hands and kept rates on hold. Meanwhile, the Loonie was down in the dumps as the U.S. and Mexico are making plans to move forward with a trade deal without Canada.
U.S. new home sales up from 608K to 629K vs. 630K forecast
EIA crude oil inventories up 1.9M barrels vs. projected 0.7M drop
FOMC hiked rates from <2.00% to <2.25% as expected
Fed upgraded 2018 GDP forecast from 2.8% to 3.1%, inflation estimate unchanged
Fed upgraded 201 GDP forecast from 2.4% to 2.5%, inflation downgraded from 2.1% to 2.0%
Powell: Dropping “accommodative” in the statement doesn’t signal change in policy
White House to publish text on U.S. -Mexico trade deal by Friday?
Trump to sign U.S. spending bill to avert government shutdown
Trade negotiations between the U.S. and Japan to start
RBNZ kept rates on hold at 1.75% as expected, likely until 2020
RBNZ head Orr: CPI remains below 2% mid-point of target
As everyone and his momma expected, the U.S. central bank decided to hike interest rates by 0.25% in this week’s meeting. Their official statement was more or less a rehash of their previous one, except for that bit where they removed the reference to “accommodative” in talking about policy.
In particular, this part from the August announcement was dropped:
The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
During his opening statement during the presser, Fed Chairman Powell acknowledged that growth is strong and that inflation is stable but that the benefits of the economy aren’t spreading wide enough. He also clarified that dropping “accommodative” doesn’t signal a change in their policy stance, stating:
“This change does not signal any change in the likely path of policy. We still expect, as our statement says, further gradual increases in the target range for the fed funds rate.”
Furthermore, in response to questions from the press, Powell explained that the idea of accommodative and neutral level is less important, as they are mainly trying to balance between moving too fast
or too slow.
This view was reflected in the updated dot plot forecast of interest rate changes, which still signaled some calls for another hike in December and possibly three more next year.
Fed officials also upgraded this year’s growth forecast from 2.8% to 3.1% while keeping the estimate for PCE inflation unchanged at 2.1%. They see GDP growth at 2.5% for next year, a notch higher from their earlier 2.4% forecast, but projected that inflation would come in at
2.0% versus the previous 2.1% estimate.
Not surprisingly, the POTUS wasn’t too happy about this, lamenting in a press conference:
“I’d rather pay down debt or do other things, create more jobs. So I’m worried about the fact that they seem to like raising interest rates.”
As widely expected also, the RBNZ kept interest rates on hold at 1.75% and signaled that they could keep them there until 2020. In the official statement, RBNZ Governor Orr said:
“Consumer price inflation remains below the 2 percent mid-point of our target, necessitating continued supportive monetary policy.”
He also reiterated that their not-so-upbeat forecasts from their earlier statement remain unchanged, even as the latest batch of economic figures printed some upside surprises. Orr also highlighted trade tensions as a risk to global growth.
The odds of seeing a trilateral trade deal between the U.S., Mexico, and Canada anytime soon appear to be growing slimmer as the Trump administration could move forward with a text of an agreement with Mexico by Friday.
Canadian PM Trudeau mentioned that existing U.S. tariffs on Canadian steel and aluminum in late May would have to be scrapped before they agree to a trade deal. He reiterated that they are prepared to walk out of an agreement if it isn’t good for Canada.
The Donald told reporters that he was so unhappy with the pace of negotiations that he rejected a request for a one-on-one meeting with Trudeau this week. However, a spokesman from the PM’s office said that no such meeting was requested.
U.S. equities initially rallied on the Fed’s signal to end “accommodative” policy but erased these gains and more before the closing bell tolled when Powell explained what this move meant (or didn’t mean).
Dow 30 index closed 106.93 points down to 26,385 (-0.40%)
S&P 500 index is down 9.59 points to 2,905.97 (-0.33%)
Nasdaq is down 17.11 points to 7,990.37 (-0.21%)
Dollar bulls were already charging during the earlier session but returned some gains leading up to the official announcement.
Dropping the “accommodative” bit led to a sharper drop as this was seen as a dovish move, but the recovery during the presser was swift when Powell clarified that this change didn’t really reflect a different policy stance.
USD/JPY slumped to a low of 112.77 during the announcement then scrambled back up to a high of 113.14 before tumbling again; EUR/USD popped to a high of 1.1798 then fell back to 1.1731; USD/CHF slipped to a low of .9623 then recovered to .9663.
The Loonie continued to crawl lower as it became more apparent that the U.S. and Mexico would proceed with their bilateral trade deal and leave Canada behind.
USD/CAD climbed from 1.2950 to a high of 1.3031; CAD/JPY sank from 87.15 to a low of 86.36; EUR/CAD popped up from 1.5212 to 1.5317, and GBP/CAD is up to 1.7165.
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