FX Trader, Loonieviews.net
It is the final weekend of August and for many, the month can’t end fast enough. Trade issues, tariffs, and Trump Tweets about the Fed’s interest policies led to a choppy trading environment. The US dollar is closing out the week with losses against the major G-10 currencies, led by a 1.40% rise in EURUSD from the New York close on August 17 to 1400 GMT today. The Japanese yen was the only loser, shedding 0.76%. The Australian dollar has almost erased all of its domestic political turmoil losses while the Canadian dollar is flat and directionless.
This morning’s release of US Durable Goods Orders data for July was worse than expected and led to fresh US dollar selling.
Wall Street opened in positive territory, undeterred by the soft Durable Goods data and apparently unconcerned about the Powell speech. Oil prices extended European gains, supported by the prospect of Iran oil sanctions limiting supply and the lack of negative fall-out from the US/China talks.
The report will be forgotten by the time Fed Chair Jerome Powell begins his speech (1400 GMT) Mr Powell is expected to reaffirm the Fed’s independence after President Trump's complaints about interest rates, earlier this week. This year’s Jackson Hole Symposium lacks the star power of other years. Bank of Japan Governor Haruhiko Kuroda, Bano of England Governor Mark Carney, and European Central Bank President Mario Draghi are missing in action.
Next week’s US data includes US Q2 GDP (forecast 4.0%) and on Wednesday and PCE index on Thursday. Key Eurozone data isn’t available until Friday when inflation and unemployment reports are released. Hire than expected core inflation could trigger EURUSD demand. Canada Q2 GDP (forecast 3.0%, y/y) will be critical for USDCAD traders. An upside surprise would boost the odds for a September 5 rate hike. The week will end with the US month-end portfolio rebalancing flows.
Sterling appears to be defying gravity. GBPUSD is in a one-week uptrend while prices are above 1.2810, looking for a test of resistance at 1.2940. The rally is despite the UK government releasing a host of Brexit papers and Chancellor of the Exchequer Philip Hammond warning of the economic consequences of a “no-deal” Brexit.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
