Forex today: trade headlines dominate and weigh on the greenback, commodity-fx gets a break

Forex today was surrounded by trade headlines while price action was mostly lead with CNH making a bottom which weighed on the dollar as commodities and commodity-FX moved higher, led by the Loonie due to positive NAFTA noise.

At the same time, and later in the day, in a surprise development, news reports indicate that European Commission President Juncker and President Trump reached an agreement to reduce trade tensions between the EU and the US as analysts at Nomura explained:

"The reported deal includes the EU agreeing to increase purchases of US liquefied natural gas and soybeans while lowering some industrial-related tariffs. At a minimum, the deal lowers US-EU trade tensions and could indicate that if the Section 232 auto imports investigation moves ahead, President Trump could exempt the EU from any quota or tariff enactment."

The DXY tailed off having traded within a range of between 94.1420-94.6650 and US 10yr treasury yields started out moving in a narrow sideways range between 2.93% and 2.95% before jumping to 2.97% on the trade headlines later in the shift. The 2yr yields climbed from 2.64% to 2.67% - the highest since 2008 while the Fed fund futures yields continue to be pricing in around two more full hikes in 2018.

Commodity-fx was strong on the headlines and the CRB moved back above the 200 DMA. Copper was higher on the back of the China rebounding and AUD/USD popped from 0.7395 a make two week high of 0.7464, reversing from the CPI losses. The kiwi followed suit and climbed from 0.6790 to a two week high of 0.6842. The canary Canadian dollar was leading the pack though, having been a strong leader for larger currency trends this year, and climbed to 1.3036 from a low of 1.3385 in yesterday's Asian trade vs the greenback. 

The single unit was choppy ahead of the trade news headlines and dropped below 1.1665 before a rally was made on dollar weakness to 1.1738 before settling down for a North America close of 1.1727. The pound was firm on the Boe expectations but rallies remain shallow due to the overhanging Brexit angst. Sterling was closing the NY session at 1.3166 having traded between an NY range of 1.3178/34. The cross was a touch lower to 0.8880, having been trading within a range of 0.8903-0.8873 as traders get set for the ECB. USD/JPY fell from 111.30 to 110.67 which is close to the 50% level of the May-July rise as the dollar sinks across the board. The BoJ is coming up next week and thee have been further chatters around the possibility of a BOJ policy tweak adding weight to the downside. 

Key notes from the US:

Wall Street records substantial gains as Trump-Juncker trade summit boosts sentiment

Key events ahead:

Analysts at Westpac offered their outlook for the key events coming up as follow:

  • "In Australia, Q2 trade prices are expected to show import prices increasing 1.9% (Westpac +2.5%) and export prices down 1.3% (Westpac -0.8%).
  • The ECB policy decision is widely expected to be unchanged. June’s guidance set out that asset purchases will finish at year end and rates are seen to be on hold to the European Summer 2019. As such, the July meeting is unlikely to contain any new material information but their assessment of global risks will be in focus.
  • Draghi will likely use the press conference to warn that global trade tensions could weigh on growth, though the positive news from the Trump/ Juncker meeting may be reflected in his commentary.
  • Note the WTO holds a general council meeting Thursday/ Friday to cover US/China trade conflict issues. NAFTA talks will be held in Washington.
  • US Jun durable goods orders are expected to rise 3.0% on a jump in the volatile transport sector. Core capital goods orders are seen to rise 0.3%, following May’s 0.5% gain. Jun wholesale inventories are also out and will be of interest ahead of tomorrow’s Q2 GDP 1st estimate."

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