August 31, 2018
Pulse of the Market
· The Dollar traded higher as data showed inflation continue to meet the Federal Reserve’s target
· Consumer spending, which accounts for more than two-thirds of U.S economic activity, rose 0.4%
· The British Pound struggled to hold gains against the Dollar following its sharp rise
· The Canadian Dollar retreated from 2-1/2 month peaks against the greenback yesterday
|The U.S. dollar rebounded against all of the major currencies yesterday with the exception of the Japanese Yen and its underperformance tells us that the dollar was driven higher by a reduction in risk. We can identify at least 3 reasons for the dollar’s decline today. First and foremost, stocks have retreated from their highs after hitting record-breaking levels every day this week and the sell-off prompted a recovery in the dollar. All of the good news this week encouraged investors to take on risk but with stocks retreating, currencies like euro, sterling and the Canadian dollars also came off their highs. One of the main reasons for the pullback in equities and currencies is the end of the month profit taking but President Trump’s threat to withdraw from the WTO also did not help. Third, while this morning’s U.S. economic reports were mixed, economic data from other parts of the world were unambiguously disappointing leading to a weakness for those currencies. Today won’t be about data even though the Chicago PMI report and revisions to the University of Michigan’s Consumer Sentiment index is due for release. Month-end flows and updates on Brexit negotiations or Canada-US trade talks will drive currency movements. USD/JPY gave up all of yesterday’s gains but needs to close firmly below 111.00 to usher in a new wave of dollar weakness. Unlike some of the other major currencies, the slide in USD/JPY will be limited by the prospect of Fed tightening. The dollar could continue to rise against the euro. We’ve been talking about Italian bond yields all week and said yesterday’s pullback was unjustified. Today Italian yields shot up to fresh 4 year highs, driving the spread between Italian and German bond yields to their widest level in 5 years. Italy is the biggest problem for the euro right now and Fitch is scheduled to update their rating for Italy today. Sterling, on the other hand, should continue to outperform and will be an attractive long near 1.2950. UK mortgage approvals were lower than expected but the dollar’s recovery is the primary reason for the currency’s slide. The Canadian dollar sold off sharply on the back of a softer than expected GDP report. Growth stagnated in the month of June, causing the year over year rate to slip from 2.7% to 2.4%.|
|01:00||China Non-manufacturing PMI (AUG)||Medium||53.7||54|
|01:00||China Manufacturing PMI (AUG)||High||51||51.2|
|01:30||Australia Private Sector Credit (YoY) (JUL)||Medium||4.4%||4.5%|
|05:00||Japan Housing Starts (YoY) (JUL)||Medium||-4.3%||-7.1%|
|06:00||German Retail Sales (YoY) (JUL)||Medium||1.3%||3.0%|
|09:00||Euro-Zone Unemployment Rate (JUL)||Medium||8.2%||8.3%|
|09:00||Euro-Zone Consumer Price Index Core (YoY) (AUG)||High||1.1%||1.1%|
|10:00||Italian Gross Domestic Product w.d.a. (YoY) (2Q)||Medium||1.1%||1.1%|
|13:45||U.S Chicago Purchasing Manager (AUG)||Medium||64||65.5|
|14:00||U.S U. of Mich. Sentiment (AUG)||Medium||95.5||95.3|
|17:00||Baker Hughes U.S. Rig Count (AUG 31)||Medium||1044|
The single currency fell as the Euro zone economic sentiment edged lower for an eight consecutive month in August, pulled down by less optimism in industry and services, a monthly survey by the European Commission showed. The Commission survey showed the economic sentiment indicator eased to 111.6 points in August. Overall, the EUR/USD traded with a low of 1.1640 and a high of 1.1716 before closing the day around 1.1669 in the New York session.
The Japanese Yen has edged higher erasing the losses seen on Wednesday. On the release front, Japanese retail sales dropped to 1.8%, but still, beat the estimate of 1.5%. Later in the day, Japan releases Tokyo Core CPI, with a forecast of 0.8%. In the U.S, Core PCE Price Index edged up to 0.2%, while Personal Spending remained pegged at 0.4%. Overall, the USD/JPY traded with a low of 110.93 and a high of 111.73 before closing the day around 110.97 in the U.S session.
The British Pound held near a four-week high as investors hesitated to take fresh positions on the currency amid a spate of crisscrossing Brexit headlines. Sterling surged more than one percent on Wednesday as traders covered short positions after the European Union’s Michel Barnier said that the UK could be offered an unprecedented partnership. Overall, the GBP/USD traded with a low of 1.2983 and a high of 1.3041 before closing the day at 1.3008 in the New York session.
The Canadian Dollar fell as data showed the economy grew at a slower pace in the second quarter, supporting traders’ view the Bank of Canada will leave key interest rates on hold next week. Prices on domestic government debt rose in the wake of the latest gross domestic product figures, flattening the yield curve on the notion of slowing economic growth. Overall, USD/CAD traded with a low of 1.2901 and a high of 1.2998 before closing the day at 1.2979 in the New York session.
The Australian Dollar fell sharply yesterday after figures for capital expenditure and building approvals missed expectations, and the New Zealand dollar took a knock on business sentiment. The Australian Dollar weakened yesterday following the release of second-quarter capital expenditure which fell 2.5 per cent compared to the previous quarter. Overall, AUD/USD traded with a low of 0.7247 and a high of 0.7313 before closing the day at 0.7254 in the New York session.
EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 55 and lies above the neutral zone. In general, the pair has lost 0.93%.
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 55 reading and lies above the neutral zone. On the whole, the pair has lost 0.74%.
Currently, the cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is giving a bearish tone and MACD is indicating a bullish stance. The Relative Strength Index is above 40 reading and lies below the neutral region. In general, the pair has lost 1.24%.
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 50 and lies above the neutral region. On the whole, the pair has lost 0.18%.
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is indicating a bearish tone. The Relative Strength Index is above 33 and lies below the neutral region. In general, the pair has lost 0.26%.
|FOREX Closing Prices for August 30, 2018|
|Daily Pivot Points|
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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