August 28, 2018
| Pulse of the Market
· The United States and Mexico reached a bilateral deal on NAFTA yesterday
· Easing fears over a global trade war helped the dollar pare some losses against the Yen
· Gains in the British Pound were kept in checked by fears of a no-Brexit deal
· Euro gained following better-than-expected business confidence in Germany
|The U.S Dollar fell sharply against its rivals yesterday on fading fears over the prospect of a global trade war after the United States and Mexico reached a bilateral deal on NAFTA, paving the way for Canada to rejoin talks. The U.S Dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.47% to 94.63. President Donald Trump on Monday announced his administration had reached a deal with Mexico on issues that have upended the renegotiation of the North American Free Trade Agreement (NAFTA), the current trade agreement among the U.S., Canada and Mexico, for over a year. , Trump suggested the United States-Mexico Trade Agreement would replace NAFTA, paving the way for Canada to rejoin talks, bringing Trump a step closer to overhauling NAFTA and reducing investor fears over a full-blown trade war. Trump reportedly warned, however, that if a deal with Canada failed to materialized, then the U.S. would move ahead with tariffs on imported goods from Canada. This would dent the Loonie as it throws into doubt expectations about a September rate hike. By saying Canada could be left out, the US is threatening to take a tough line in those talks. The scenario poses uncertainty for Canadian economy, and could prompt Bank of Canada to hold off on a rate rise early next month. Fears over a full-blown trade war had kept demand for the greenback elevated on expectations that the strong U.S. economy would be less troubled from a trade war than that of its rivals. The dollar’s poor start the week comes as analysts warned that investor conviction for the greenback was starting to wane. Investors’ conviction in the strength of the dollar is starting to wane, including U.S. Federal Reserve Chairman Jerome Powell’s comments at Jackson Hole and recent developments in Washington. The plunge in the dollar was further compounded by strength in both euro and pound. EUR/USD rose 0.52% following better-than-expected business confidence in Germany, the Eurozone’s largest economy. GBP/USD gained 0.31%, although gains in the pair were kept in checked by fears of a no-Brexit deal, which would see the U.K crash out of the European Union without a trade deal with the member bloc and would likely hurt the U.K economy.
|06:00||U.K Nationwide House Px n.s.a. (YoY) (AUG)||Medium||2.7%||2.5%|
|08:00||Euro-Zone M3 Money Supply (YoY) (JUL)||Low||4.3%||4.4%|
|11:00||ECB Board Member Peter Praet Speaks in Cologne, Germany||Low|
|12:30||U.S Advance Goods Trade Balance (JUL)||High||-$69.0b||-$68.3b|
|12:30||U.S Wholesale Inventories (MoM) (JUL)||Medium||0.2%||0.1%|
|12:30||U.S Retail Inventories (MoM) (JUL)||Low||0.0%|
|13:00||S&P/Case-Shiller Composite-20 (YoY) (JUN)||Medium||6.43%||6.51%|
|13:00||S&P/Case-Shiller US Home Price Index (YoY) (JUN)||Medium||6.38%|
|14:00||U.S Richmond Fed Manufact. Index (AUG)||Low||17||20|
|14:00||U.S Consumer Confidence Index (AUG)||High||126.5||127.4|
|14:00||U.S Conf. Board Present Situation (AUG)||Medium||165.9|
The single currency gained following the latest fundamental data from Germany, the largest economy within the Eurozone shows business morale improving finally this year. IFO had reported that August’s readings were improved across the board, with the current assessment coming in at 106.4, above the 105.4 expected. Overall, the EUR/USD traded with a low of 1.1593 and a high of 1.1692 before closing the day around 1.1676 in the New York session.
The Japanese Yen posted slight gains yesterday. It’s a quiet start to the week, with no Japanese or U.S events. Today, the U.S releases CB Consumer Confidence. Japanese inflation numbers in July were slightly softer than expected. National Core CPI remained pegged at 0.8%, shy of the estimate of 0.9%. The Services Producer Price Index edged lower to 1.1%. Overall, the USD/JPY traded with a low of 110.91 and a high of 111.32 before closing the day around 111.05 in the U.S session.
The British Pound traded higher at the start of the new week yesterday. Despite the exchange rate recovering from earlier lows, there is a strong risk Sterling tests fresh lows over coming days as markets continue to factor a ‘no-deal’ Brexit. The Pound sold off close to year-long lows in the previous week. Overall, the GBP/USD traded with a low of 1.2827 and a high of 1.2899 before closing the day at 1.2891 in the New York session.
The Canadian Dollar reacted in a positive fashion to news of a breakthrough in NAFTA negotiations between the US and Mexico yesterday, August 27. According to reports, the United States and Mexico have reached an agreement to revise key portions of the 24-year-old North American Free Trade Agreement. Overall, USD/CAD traded with a low of 1.2951 and a high of 1.3065 before closing the day at 1.2965 in the New York session.
The Australian Dollar rallied on optimism that new PM Morrison would not seek to radically change economic policies. He is the 6th Prime Minister in 10 years. The markets actually reacted positively to the news, with the AUD gaining strength following Morrison’s victory. Morrison had served as the country’s treasurer for three years. Overall, AUD/USD traded with a low of 0.7305 and a high of 0.7354 before closing the day at 0.7344 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 60 and lies above the neutral zone. In general, the pair has gained 0.31%.
Currently, GBP/JPY is trading above 14 and below 50, 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 47 reading and lies below the neutral zone. On the whole, the pair has gained 0.18%.
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 50 reading and lies above the neutral region. In general, the pair has gained 0.13%.
This cross is currently trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 70 and lies above the neutral region. On the whole, the pair has gained 0.10%.
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 28 and lies below the neutral region. In general, the pair has lost 0.02%.
|FOREX Closing Prices for August 27, 2018|
|Daily Pivot Points|
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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