September 20, 2018
| Pulse of the Market
· U.S current account deficit narrowed in the second quarter while housing starts jumped 9.2%
· Brexit and trade headlines took currencies on a rollercoaster ride yesterday
· The British Pound will remain in play today with UK retail sales scheduled for release
· USD/CAD jumped following reports that trade deal between U.S and Canada is unlikely this week
|The U.S Dollar ended the day lower against most of the major currencies despite a sharp rise in U.S yields and better than expected U.S data. The current account deficit narrowed in the second quarter while housing starts jumped 9.2%. These numbers easily offset the -5.7% drop in building permits. We need to look no further than risk appetite for an explanation as to why the dollar performed so poorly today. The strong performance of U.S. stocks along and the continued recovery in the Australian dollar tell us that no one is worried about the trade war. The U.S imposed tariffs on $200B of Chinese goods and China responded with levies on about $60B of U.S goods. Retaliation is not a step in the right direction but China imposed only a 5% and 10% penalty of U.S. imports, which is lower than the 5% to 25% levels previously proposed. To the market’s relief, this is also the first time that Beijing did not match Washington’s tariffs dollar by dollar. Brexit and trade headlines took currencies on a rollercoaster ride yesterday. At the start of the NY session, GBP/USD dropped 90 pips in one minute on reports by the Times of London that UK Prime Minister May plans to reject the European Union’s improved Brexit offer. Earlier this week, the EU seemed to be willing to agree on the UK rather than EC inspectors at the border but the UK refuses to accept the EU’s insistence on customs checks in the Irish Sea if there isn’t a free trade agreement after Brexit. The Irish border has been the biggest hang-up in negotiations and the possible rejection of the EU’s offer reignited concerns about a no-deal Brexit and even a second referendum. For most of the month, we heard about possible concessions from the EU and reports of progress in Brexit talks but starting last week, the tone from the UK began to change. The UK government suggested that they’ve done all they can and the EU needs to stop revisiting previous positions. GBP/USD remains in play today with UK retail sales scheduled for release. While consumer and producer price growth was stronger than expected, Thursday’s report could fall short of expectations. Spending increased significantly last month so there’s potential for a pullback especially after the British Retail Consortium reported a decline.|
|07:30||SNB Sight Deposit Interest Rate (SEP 20)||High||-0.75%||-0.75%|
|07:30||SNB 3-Month Libor Lower Target Range (SEP 20)||High||-1.25%||-1.25%|
|07:30||SNB 3-Month Libor Upper Target Range (SEP 20)||High||-0.25%||-0.25%|
|08:30||U.K Retail Sales Ex Auto Fuel (YoY) (AUG)||Medium||2.3%||3.7%|
|12:30||U.S Philadelphia Fed Business Outlook (SEP)||Medium||15.8||11.9|
|12:30||U.S Initial Jobless Claims (SEP 15)||Medium||210k||204k|
|12:30||U.S Continuing Claims (SEP 08)||Medium||1705k||1696k|
|13:15||EU Informal Meeting of Heads of State Summit Press Conference||High|
|14:00||U.S Leading Index (AUG)||Medium||0.50%||0.6%|
|14:00||Euro-Zone Consumer Confidence (SEP)||Medium||-2.0||-1.9|
|14:00||U.S Existing Home Sales (MoM) (AUG)||Medium||0.8%||-0.7%|
|23:30||Japan National Consumer Price Index (YoY) (AUG)||High||1.1%||0.9%|
The single currency traded higher against the U.S Dollar yesterday. European Central Bank President Mario Draghi called for a euro-area fund to complement monetary policy, renewing his plea to governments to strengthen the currency bloc before another crisis strikes. Heads of state are due to meet in Brussels for a summit next month. Overall, the EUR/USD traded with a low of 1.1648 and a high of 1.1713 before closing the day around 1.1671 in the New York session.
The Japanese Yen gained slightly against the U.S Dollar as investors appeared little shaken by the latest round of tariffs announced by China and the U.S. China and the U.S plunged deeper into a trade war after President Donald Trump levied tariffs on $200 billion worth of Chinese goods. Beijing retaliated with duties on about $60 billion worth of U.S. goods. Overall, the USD/JPY traded with a low of 112.14 and a high of 112.48 before closing the day around 112.25 in the U.S session.
The British Pound got another shot in the arm after the latest measure of consumer inflation was released this morning, which revealed a surprisingly strong reading for the month of August. According to the ONS, the headline Consumer Price Index (CPI) jumped to 2.7% year-on-year in August compared to 2.5% previously, while core CPI rose to 2.1% versus 1.9% last. Overall, the GBP/USD traded with a low of 1.3096 and a high of 1.3213 before closing the day at 1.3142 in the New York session.
The Canadian Dollar strengthened to its highest in nearly three weeks as investors grew optimistic that a deal to renew the NAFTA trade pact would be reached before an Oct. 1 deadline. Canadian Prime Minister Justin Trudeau said he wanted to see flexibility from the United States if the two sides are to reach a deal on the North American Free Trade Agreement. Overall, USD/CAD traded with a low of 1.2897 and a high of 1.3013 before closing the day at 1.2915 in the New York session.
The Australian Dollar has continued its rebound to a three-week high, despite an increase in US interest rates, and also gained against other major currencies. It seems global investors are betting that the US-China trade war will not be as bad as they initially feared. After all, both the tariffs imposed by Washington and Beijing on each other were less severe than they had previously warned. Overall, AUD/USD traded with a low of 0.7211 and a high of 0.7273 before closing the day at 0.7261 in the New York session.
EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is issuing a bullish stance. The Relative Strength Index is above 62 and lies above the neutral zone. In general, the pair has lost 0.02%.
Currently, GBP/JPY is trading above 14, 50 and below 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 66 reading and lies above the neutral zone. On the whole, the pair has lost 0.09%.
Currently, the cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 57 reading and lies above the neutral region. In general, the pair has gained 0.54%.
This cross is currently trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish tone and MACD is also issuing a bearish signal. The Relative Strength Index is above 42 and lies below the neutral region. On the whole, the pair has gained 0.07%.
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 54 and lies above the neutral region. In general, the pair has gained 0.25%.
|FOREX Closing Prices for September 19, 2018|
|Daily Pivot Points|
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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