Forex today was driven by risk-off flows, intensified by ongoing geopolitical tensions between the US and North Korea over the missile threat. Amongst the Asia-pac currencies, the Aussie was the worst hit, having faced double whammy from risk-aversion on one hand, while RBA Governor Phillip Lowe’s jawboning dented the sentiment around the AUD on the other hand.
Meanwhile, broad based Yen strength kept the Asian indices on the back foot, while the region’s equities also suffered from tumbling oil prices, which weighed down on the energy and resources stocks.
Main topics in Asia
North Korea: U.S. will suffer "a shameful defeat"
According to the Korean Central News Agency (KCNA), North Korean government has said that U.S. will suffer "a shameful defeat" and vows to mercilessly wipe out the provocateurs.
U.S. Defense Sec Mattis: Diplomatic efforts on North Korea "gaining traction"
U.S. Defense Secretary James Mattis was on the wires, via Reuters, stating that United States prefers diplomatic approach to North Korean threat.
RBA's Lowe: further AUD gains would slow inflation pickup, employment
RBA's Lowe is testifying before the House of Representatives’ Standing Committee on Economics in Melbourne.
RBA’s Lowe indicates readiness to intervene in FX markets in extreme situations
Comments from RBA’s Lowe on the exchange rate and FX markets are crossing the wires.
Key Focus ahead
Looking ahead, we have a relatively quiet EUR calendar today, with the second-tier releases in the German and French final CPI likely to have no impact on the fx markets, while the US docket remains quite eventful with the much-awaited US CPI data on the cards, which will hold the key for future path of Fed monetary policy. The US July CPI figures are expected to come in at 0.2% versus 0.0% last, while the core figures are seen at 0.2% versus 0.1% previous.
EUR/USD - All eyes on Inflation differential and trend line support
The EUR/USD pair dropped to a low of 1.1704 yesterday before ending the day with moderate gains at 1.1772 on the back of a dismal US PPI reading.
GBP/USD - Focus on the 23.6 % Fib support of 1.2965 & US CPI
The sell-off in the GBP/USD following the bearish rising wedge pattern breakdownappears to have run out of steam around 1.2965, which is the 23.6% Fib support of the rally from 1.1986 to 1.3268.
Why the U.S. Dollar Can't be Saved by CPI Alone
The most important event risk for the U.S. dollar this week is Friday's inflation report but consumer prices alone won't be enough to save the dollar.
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Editors’ Picks
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Key economic and earnings releases to watch
The market’s focus may be on geopolitical issues at the start of this week, but there is a large amount of economic data and more earnings releases to digest in the coming days.