• Forex markets were seeing a better risk tone and the Dollar firmed.
  • The 10-year yield climbed from 1.52% to 1.55%.

On a light data calendar, forex on Friday was reacting to a slightly better risk tone with a correction in stocks as the reports of a surplus balance Germany that could loosen fiscal policy made for a knee-jerk relief in markets.

As for data, the US July housing starts and permits were mixed while the University of Michigan consumer sentiment in August was softer than expected, although inflation expectations lifted a touch. US 2-year Treasury yields ranged between 1.48% and 1.52%, closing at 1.48%, while the 10-year yield climbed from 1.52% to 1.55%. The Dollar was steadied on the lower end of the 98 handle. 

Currency action

Analysts at Westpac offered a breakdown of the currency action on Friday as follows:

  • EUR/USD round-tripped from 1.1105 to 1.1065 and back, finding support on a report in Der Spiegel that the German government is willing to run budget deficits if recession looms. 
  • GBP/USD outperformed, rising from 1.2100 to 1.2175, after Labour leader Corbyn sought a coalition aimed at blocking a no-deal Brexit.
  • USD/JPY rose from 106.10 to just short of 106.50 as US equities closed the week firmed but dipped a little early Monday as President Trump said the US “ultimately” did not want to do business with Huawei on national security grounds, though he would be making a formal announcement on Monday. Trump also said that if Beijing used violence against Hong Kong protesters, it would make it hard for the US to reach a trade agreement.
  • AUD/USD ranged sideways between 0.6770 and 0.6795, retreating from a probe of 0.6800 on Monday’s open on the Huawei headlines.
  • Underperformer NZD drifted lower from 0.6445 to 0.6423.
  • AUD/NZD nudged higher from 1.0540 to 1.0560.

Risks ahead for the week:

Trump will make a decision on whether to allow companies to restart business with Huawei in certain products and Eurozone July Consumer Price Index could well confirm annual core inflation of 0.9% for the year. As for central banks, markets will await the Reserve Bank of Australia's August minutes tomorrow and then the Federal Open Market Committee Minutes (21 Aug) and Jackson Hole Sym. (22-24 Aug).
 

 

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