Geo-Politics and the USD in Focus, with no Stats to Influence

Earlier in the Day:

It’s a particularly quiet start to the week, with no economic data released through the Asian session this morning, leaving the markets to ponder on the events of last week and what lies ahead for the week, with the U.S and China sitting down at the negotiating table to pave the way for a Xi – Trump Summit in November, the Turkey Lira crisis far from over as Trump looks to throw in more tariffs and then there’s Italy and rising concerns over the of the possible effects of the Turkey Lira crisis on Italy’s banks.

Following the Dollar reversal on Friday, which came off the back of optimism over this week’s U.S – China meeting on trade, there was some reversal for the Asian majors, in spite of the gains in the U.S equity markets on Friday, with the reality being that there’s unlikely to be any resolution to the trade spat until November. Added to that, an additional $16bn worth of Chinese goods are scheduled to be hit with 25% tariffs on Thursday and there’s been no talk of a delay through to the planned November summit.

At the time of writing, the Japanese Yen was flat at ¥110.50 against the U.S Dollar, with the Aussie Dollar down 0.16% to $0.7301, while the Kiwi Dollar struggled early on, down 0.24% to $0.6621, with this week’s trade data and retail sales figures likely to deliver some sizeable moves for the Kiwi that remains susceptible to another pullback to $0.65 levels should the numbers disappoint later in the week.

In the equity markets, it was a mixed start to the week, with the Nikkei down 0.44%, while the CSI300 and Hang Seng were up 0.27% and 0.22% respectively, at the time of writing, the Hang Seng finding strong support from another Tencent rally, while a pullback in the financial sector limited early gains.

For the ASX200, the index gave up more sizeable gains from the start of the day and was up just 0.09%, with losses amongst the big-4 Banks pinning the index back in the early hours.

The Day Ahead:

For the EUR, economic data scheduled for release through the day is limited to this morning’s July wholesale inflation figures out of Germany.

While forecasts are for a slight pickup that would provide some support to the EUR, market sentiment towards Italy and an end to Greek’s bailout program will also be factors to consider, alongside news of another round of trade talks between the EU and the U.S that will likely begin to hit the news wires.

At the time of writing, the EUR was down 0.06% to $1.1431, with market sentiment towards Turkey and ultimately fresh concerns over Italy’s banking sector to provide direction through the day.

For the Pound, it’s a quiet day on the data front, leaving the markets to consider the UK government’s progress on Brexit, which has been limited at best, with the issue of Ireland continuing to be a stumbling block that has left the more important subject of trade on the side lines.

As the prospect of a “no deal” Brexit rises, pressure on Theresa May and the Conservative Party will likely begin to return, which would see the Pound under more pressure.

At the time of writing, the Pound was down 0.05% to $1.2742, with Brexit chatter the key driver through the day.

Across the Pond, there is no economic data scheduled for release through the afternoon, leaving the Dollar in the hands of the Oval Office and FOMC member Bostic, who is scheduled to speak later in the day.

While any hawkish commentary from Bostic would be Dollar positive, the markets are not expecting more than a final rate hike for the year, with economic data out of the U.S beginning to raise questions on momentum, which FED Chair Powell will likely address from Jackson Hole on Friday.

Of greater significance will be talks on tariffs, whether the U.S will go ahead with Thursday’s planned roll out of 25% tariffs on an additional $16bn worth of Chinese goods and whether any progress is made with Turkey.

At the time of writing, the Dollar Spot Index was up 0.03% to 96.129, with the Oval Office the key driver through the day.

For the Loonie, it’s a relatively quiet week ahead, with no material stats scheduled for release this afternoon to provide direction.

The lack of data will continue to keep NAFTA news in the spotlight, with Canada’s exclusion from current talks pinning the Loonie back from more material gains off the back of the July inflation figures released on Friday that support the BoC’s more hawkish stance on policy.

At the time of writing, the Loonie was down 0.04% to C$1.3066, with any updates on NAFTA expected to provide direction through the day.