It’s Dollar Day, with FOMC Minutes, Stats and Trump’s Tariffs in Focus
Earlier in the Day:
There were no material stats released through the Asian session this morning to provide direction to the majors, leaving the markets to consider the FOMC meeting minutes due out later today, this week’s labour market figures out of the U.S and, more importantly, whether China and the U.S will proceed with rolling out the fresh tariffs tomorrow.
With time zones giving China the first shot on Friday, the positive for the markets this morning will be the comments from the Finance Ministry on Wednesday, where the Chinese government was clear that it would not fire the first shot in the trade war on Friday and that it would not be implementing tariff measures ahead of the U.S doing so, leaving it all in the hands of the U.S President who seems particularly eager to, not only roll out fresh tariffs on China, but hit other economies along the way.
At the time of writing, the Aussie Dollar was down 0.24% to $0.7368, while the Japanese Yen was up 0.05% to ¥110.43 against the U.S Dollar, China’s stance on tariffs providing the markets with little risk appetite at the start of the day, supporting appetite for the safe haven plays through the morning. A battered Kiwi Dollar managed to find some support through the morning, up 0.06% to $0.6766, though the gains were more technical than off the back of any shift in sentiment towards RBNZ policy.
In the equity markets, the ASX200 ended the day with a 0.41% gain to buck the trend seen across the broader market as the Hang Seng and CSI300 continued to bleed, the pair down 1.31% and 0.73% respectively at the time of writing. Things were not much better for the Nikkei, which was down 1.11% ahead of the close.
The Day Ahead:
For the EUR, economic data scheduled for release this morning is limited to May factory orders out of Germany. Following June’s private sector PMI numbers that showed slower growth in the manufacturing sector, the markets will be looking for a rebound in factory orders, following April’s 2.5% slide.
Positive numbers will provide the EUR with some immediate direction, though geo-politics will likely have the final say.
Following Monday’s Merkel – Seehofer agreement on migration, the Social Democrats could still bring down the coalition government, the Monday agreement having been between the CDUs and CSUs.
Talks resume today and things could get messy for the EUR should there be any hint of the Social Democrats snubbing the agreement, which could ultimately lead to fresh elections and, following Italy’s election result, it wouldn’t just be the EU that would get nervous at the prospect of another election.
At the time of writing, the EUR was up 0.09% to $1.1668, with today’s data, updates from the Social Democrats and noise from the Oval Office the key drivers through the day.
For the Pound, the markets can take a breather following the release of June’s private sector PMI numbers through the week, with no material stats scheduled for release.
Following a pickup in private sector activity, the chances of an August rate hike have improved, with the increase in votes in favour of a rate hike in July suggesting that a move was already imminent ahead of this week’s stats.
There could be greater clarity later this morning with BoE Governor Carney scheduled to speak, any talk of an imminent move likely to see the Pound take a leap, though Carney may caveat any hawkish outlook on policy with the need for the BoE to monitor the current trade spat and progress on Brexit negotiations.
At the time of writing, the Pound was down 0.04% to $1.3225, with Carney and Brexit chatter the key drivers through the day.
Across the Pond, following Wednesday’s holiday, it’s a big day for the U.S Dollar. Key stats scheduled for release through the afternoon include June’s ADP nonfarm employment change figures, finalized June Markit service sector PMI and the market’s preferred ISM non-manufacturing PMI numbers, with the weekly jobless claims figures also there for consideration.
The Dollar would certainly find some support should the ADP nonfarm employment change numbers impress, though we would expect the ISM non-manufacturing PMI to have the greatest influence.
Outside of the stats, the FOMC meeting minutes will also be in focus, though we would expect the minutes to provide few surprises following the release of the FOMC economic projections and FOMC press conference at the time of the June rate hike.
At the time of writing, the Dollar Spot Index was up 0.06% to $94.586, with today’s stats, the FOMC meeting minutes and the Oval Office in focus, the U.S and China inching ever close to tomorrow’s fresh tariffs.
For the Loonie, it’s another quiet day on the data front, leaving direction through the day hinged on noise from the Oval Office and sentiment towards tomorrow’s stats that could provide the BoC with the necessary justifications to lift rates, though any perceived negative effects from trade tariffs on the economic outlook would need to be considered.
At the time of writing, the Loonie was down 0.06% to C$1.3151, with trade war chatter continuing to be the key driver through the day, while a pullback in crude oil prices also weighed early on.