- US Dollar takes a trip to test 97 the figure ad bounced back.
- Trade and Brexit continue to make the headlines but US yields recover some ground.
Forex at the end of last week closed with a softer Dollar which was sent down to the test 97 the figure before moving back to the daily pivot point. The markets were still trying to navigate their way through the forever conflicting trade headlines and various geopolitical news as well as further signs of a global economic contraction with poor UK GDP figures that sent the pound to the lowest levels since the start of 2017.
On the trade front, President Trump warned that US-China trade talks scheduled for next month may not take place. Conflicting reports about whether the US would do business with telecommunications firm Huawei also added to the uncertainty and continued to weigh on US stocks Friday. However, US interest rates rose slightly into the weekend with the US 2-year treasury yields climbing from 1.59% to 1.65% and the 10-year yield that climbed from 1.70% to 1.74%. As far as Federal Reserve rate cut expectations, markets were pricing 29bp of easing at the 19 September.
As for data, US PPI inflation rose 0.2% in July, for an annual pace of 1.7% - both as expected. Canada’s July employment report was weaker than expected, with jobs -24k and the unemployment rate rising from 5.5% to 5.7%.
Currency action
Analysts at Westpac wrapped up the action as follows:
- EUR/USD rose a net 20 pips to 1.1200 to start the week.
- Sterling underperformed, GBP/USD falling steadily 1.2140 to a low of 1.2025, its weakest point since Jan 2017.
- USD/JPY fell from 106.00 to 105.27 – a seven-month low – then crept back to 105.65.
- AUD/USD probed 0.6820 but couldn’t break, instead slipping to 0.6780 in NY, as equities weakened, partly attributed to President Trump saying he wasn’t bothered whether the US-China trade talks planned for September proceeded. Over the weekend, he tweeted “China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs, they must stem the flow.”
- NZD fell from 0.6499 to 0.6465 - Market pricing for RBNZ is for 6bp of easing on 25 September, with a terminal rate of 0.64%.
- AUD/NZD ranged between 1.0485 and 1.0510.
Key notes from Wall Street
Wall Street was a mixed bag to the end the week on mixed trade-war headlines
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