Welcome to my Forex Today column where I'll give a brief wrap on the key drivers of Forex markets and throw in a chart of the day.
As ever, feedback welcome....oh and for AUDUSD specifically you can find that in My Australia Today piece each morning on the blog.
And, for a deeper dive into more currencies and the charts please see my daily markets video.
The US dollar was under pressure early. But an 18 year high in consumer confidence, 10 year rates rising a little, the curve steepening a couple more points, a transcript of Robert Kaplan's interview with the Wall Street Journal, and Goldman telling clients that they’ve read Powell wrong if they think he was dovish all combined to lift the Greenback off the mat.
So the DXY is at 94.73 down just 0.05%. Euro is at 1.1692 for a gain of 0.15% after a high last night at 1.1733 – the old resistance level. Sterling is down 0.18% at 1.2867 while it’s lost a little more against the Eur with EURGBP at 0.9086 as talk – and posturing – on hard Brexit continues. USDJPY sits at 111.17, up 0.1%.
On the commodity bloc the Aussie has underperformed with a loss of 0.2% to 0.7335 while the Kiwi and CAD have gained about 0.2% to sit at 0.6708 and 1.2934 (in USDCAD terms) respectively. That break of 1.2950 for the CAD suggest further strength against the USD – and crosses – as hopes grow Canada will reach a deal on the revamped NAFTA this week.
It’s going to be the data stupid.
That’s the only thing that is going to reconcile this debate about the outlook for the Fed, for the US economy, for the 2-10 curve, and by extension the overall outlook for the US dollar through time.
Of course it’s kind of trite to say that because the data is always key. But as I highlighted in the Marco section of Markets Morning there is still a lot of debate about where the US economy is at, what the curve flattening means, and what the Fed will be doing.And of course we know that the Powell Fed is data dependant…so data matters. And of course while US data languishes beow expectations – USCESI -20.1 – it’s going to be difficult for the USD to rally much more.
So tonight’s second read on Q2 GDP is going to be interesting for forex markets – likely more so than usual. The market is expecting a slight dip to 4% from 4.1% according to the Reuters poll. But remember what that means folks – the nominal GDP print has been deflated by 3% to give the 4% (last time 4.1%) print. That’s a big inflation number folks – one the Fed will be watching.
Elsewhere in forex land the break of the USDCAD below 1.2950 opens up some further downside for toward next support at 1.2843/50.
And these constant worries about a hard Brexit – Theresa May is reported to have said it’s no big deal while the German foreign minister is said believe it’s still a chance – has seen EURGBP hit its highest level in over a year. Price has gone vertical though so I’m on watch for a reversal.
I'll discuss all the majors I follow in my video which will be out a little later this morning.
On the day we get HIA new home sales in Australia, consumer confidence in Japan, Singapore PPI, export and import prices, and then this afternoon we get the Gfk consumer confidence data from Germany. House prices are out in the UK, GDP in France as well as mortgage applications in the US. That’s all before the big one in the US tonight which is the 2nd estimate of Q2 GDP. We also see PCE prices, pending home sales, and the EIA crude and other inventory data.
Have a great day's trading.
Chief Market Strategist
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With the Fed content to frame rising US treasury yields as an echo of economic optimism, bond markets take a breather while oil prices have blown off course