Asia open: Trump undermined a broad dollar rally - TDS

Ross J Burland FXStreet

Analysts at TD Securities offered their outlook for Asia and beyond while wrapping up the key events from overnight and which remain in focus.

Key Quotes:

"President Trump undermined a broad dollar rally when he commented on Fed policy in an afternoon interview, stating he was "not happy" with continued rate hikes, spurring questions on central bank independence.

Treasuries saw a muted reaction to Trump, with a 2-3 bps rally across the curve while Canadian rates underperformed in the front-end.

The USD proved more sensitive to the President's comments, with JPY (+0.4%) rallying 0.7% immediately after the headlines before unwinding some of the move. USD/CAD (+0.7%) ground higher over the session, leaving the pair at a three-week high while Cable (-0.4%) traded below 1.30 for the first time since 2017 before recovering.

Brexit developments and top-tier Canadian data are the main market risks for Friday.

What we're watching in markets

"We've reached our year-end USD/CNY target early, and have thus revised our view for further CNY weakness.

"We continue to see the CNY REER as the operative lever through which China can ease monetary conditions against domestic deceleration, in the presence of low/stable inflation, an unwillingness to ease rates, and regulatory tightening. We now target 7.10 in USDCNY by year-end."

"FX markets were rattled by Trump's comments that he prefers a weaker USD and lower interest rate policy. That said, substitutes to the USD are not as attractive at this time given that it still holds a considerable carry advantage. As such, the moves in EUR & JPY are likely to be short-lived. We remain bearish on the dollar bloc currencies given the fractured trade backdrop and weakness in Asia FX. Firm data in Canada leave us inclined to buy USD/CAD dips near 1.3225."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

The week ahead: Dollar at a crossroads as CPI and ECB take centre stage

With the summer finally over, investors returned with a strong appetite for action. Following last week’s strong performance, the US dollar has taken a back seat so far this week, as oil, the yen and sovereign bond yields monopolized market interest.

CFTC report: Oil rebound offsets broader positioning retreat

The week in one sentence: Speculative positioning became more defensive in the week ending September 1. Yen short positioning recorded the largest deterioration, while Gold length also retreated. Oil buying returned alongside stronger prices, and Canadian Dollar and Euro positioning improved, although Euro flows diverged from weaker spot prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.