Brexit Chatter and the FED Keep the GBP and USD in the Spotlight

With economic data on the lighter side, the market focus will be on Brexit chatter and the FOMC. For the Loonie, inflation figures will also influence.
Bob Mason
Currency exchange notice board

Earlier in the Day:

The economic calendar was relatively busy through the Asian session this morning.

Economic data included 2nd quarter current account figures out of New Zealand and August trade data out of Japan.

Outside of the stats, the markets were relatively tentative ahead of the FED monetary policy decision later today. While a 25 basis point rate cut is baked in, there is plenty of uncertainty over what lies ahead. The FOMC statement, press conference and economic projections will likely be the driving force come the Asian open tomorrow.

For the Kiwi Dollar

Year-on-year, the current account deficit narrowed from NZ$10.62bn to NZ$10.23bn in the 2nd quarter. Economists had forecast a narrowing to NZ$10.12bn.

According to NZ Stats,

  • Seasonally adjusted, the current account deficit narrowed by NZ$140m to NZ$2.4bn in the 2nd
  • The primary income deficit held relatively steady at NZ$2.4bn in the 2nd quarter, just NZ$32m narrower than in the 1st

The Kiwi Dollar moved from $0.63583 to $0.63600 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.36% to $0.6336.

For the Japanese Yen

Japan’s trade deficit narrowed from ¥250.7bn to ¥136.3bn in August. Economists had forecast a widening to ¥355.9bn.

According to figures released by the  Ministry of Finance,

  • Imports fell by 12% in August, year-on-year, which was larger than a forecasted 11.2% fall. In July, imports had fallen by 1.2%.
  • Exports declined by 8.2%, year-on-year, which was lower than a forecasted 10.9% fall. Exports had fallen by 1.5% in July.
  • By country, exports to China tumbled by 12.1%, with exports to North America falling by 4.7%. Exports to Western Europe were down by 1.5%, in spite of a 4.1% rise in exports to Germany.

The Japanese Yen moved from ¥108.097 to ¥108.132 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.09% to ¥108.23 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.23% to $0.6850. While down for the morning, it all hinges on today’s FOMC. A Dovish FED could see the Aussie back at $0.69 levels…

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats are limited to the Eurozone’s finalized August inflation figures.

Barring a material deviation from prelim numbers, the stats are unlikely to have a lasting impact on the EUR.

Outside of the stats, Brexit chatter will continue to be a driving force.

At the time of writing, the EUR was down by 0.05% to $1.1067.

For the Pound

It’s a busy day ahead on the data front. August inflation figures are due out in the early part of the day.

With the markets looking ahead to the BoE interest rate decision on Thursday, expect some Pound sensitivity. Forecasts are Sterling negative.

Outside of the stats, monitoring Brexit chatter and political noise throughout the day will also be needed.

At the time of writing, the Pound was down by 0.09% to $1.2489.

Across the Pond

It’s a big day ahead on the economic calendar. On the data front, August building permit and housing start figures are due out.

With mortgage rates sitting at close to 3-year lows, particularly disappointing numbers could signal negative consumer sentiment towards the U.S and global economy.

A resumption of the U.S – China trade talks tomorrow and easing tension should limit the impact of dire numbers, however.

The main event of the day is the FOMC interest rate decision. With a 25 basis point rate cut has been priced in, the economic projections, statement and press conference will be key.

A hawkish rate cut could send U.S Treasuries tumbling…

The Dollar Spot Index was up by 0.03% to 98.286 at the time of writing.

For the Loonie

It’s also a busy day on the economic calendar. August inflation figures are due out of Canada later this afternoon.

Following the latest BoC monetary policy decision and forward guidance, a pickup in inflationary pressures would continue to support the hold on interest rates.

Outside of the numbers, crude oil prices will continue to influence as sentiment towards supply returns to normal. While crude oil prices stabilize, there could be a jolt should the U.S insinuate action in the Middle East…

The Loonie was down by 0.08% at C$1.3254, against the U.S Dollar, at the time of writing.

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