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Bob Mason
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Earlier in the Day:

It was another day of no stats through the Asian session this morning and another day of market risk aversion, with the markets continuing to respond to the rising threat of an all-out trade war and an anticipated announcement by the U.S President to block Chinese companies from having any material involvement in U.S tech companies.

The Japanese Yen was up a further 0.3% to ¥109.44, following Monday’s 0.18% rise against the Dollar, while the Aussie Dollar continued to inch back towards sub-$0.74 levels, down 0.09% to $0.7407 at the time of writing.

Things were a little worse for the Kiwi Dollar, which was down 0.19% to $0.689, as the markets look ahead to Thursday’s RBNZ monetary policy decision that could be a painful one for the Kiwi.

In the equity markets, the bloodbath continued following the overnight sell-off in the U.S, with the CSI300 and Hang Seng down 1.05% and 0.9% respectively at the time of writing. For the Nikkei, the stronger Yen contributed to the 0.52% fall, while the ASX200 saw more moderate losses, down just 0.25% ahead of the close.

It’s all about trade tariffs and, while Trump is looking to force the world’s leading economies into submission, news of U.S companies looking to shift production out of the U.S to bypass retaliatory tariffs will be a blow to the Trump ‘Make America Great’ campaign slogan, the latest moves showing just how trade wars can affect both sides of the trenches.

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The Day Ahead:

For the EUR, it’s another quiet day on the data front, with no material stats scheduled for release this morning, leaving the EUR in the hands of market risk sentiment over the remainder of the day.

Sliding U.S Treasury yields and capital flows into the EUR from carry trade reversals have provided the upside for the EUR, which was up 0.11% to $1.1717 at the time of writing. While the Dollar had initially found some interest, sentiment has deteriorated significantly, with the morning’s gains coming off the back of Monday’s 0.45% rise.

There will be little time to consider monetary policy, with even disappointing business confidence figures out of Germany not enough to pin back the EUR.

At the time of writing, the EUR was up 0.10% to $1.1716, with direction through the day in the hands of trade war chatter ahead of the EU Summit later in the week.

For the Pound, key stats through the morning are limited to mortgage approval figures that are unlikely to provide too much direction for the Pound, as the negative effects of Brexit get offset by the pullback in the Dollar in response to the slide in U.S Treasury yields.

While there are no material stats, scheduled speeches by BoE MPC members Haskel and McCafferty could provide some direction through the day should there be any hawkish chatter on monetary policy, though the current trade spat may be on the verge of becoming a global economic growth handbrake and that’s not going to be an environment to be talking up the prospects of a rate hike.

At the time of writing, the Pound was up 0.02% to $1.3284, with central bank commentary and Brexit news ahead of this week’s EU Summit to provide direction.

Across the Pond, stats through the day includes the all-important consumer confidence figures for June that may have caught the beginning of the Dow reversal, which would be a negative for the Dollar, with other stats through the day including the Redbook and April house price figures.

Recent data out of the U.S has been mixed on the manufacturing side and, with the escalation of words suggesting that Trump’s deal strategies may be beginning to fail, things could get from bad to worse in the coming months.

Outside of the data, FOMC members Bostic and Kaplan are scheduled to speak later in the day, with any central bank commentary now likely to be factoring in the possible impact of a trade war on the U.S economy and outlook on rates.

At the time of writing, the Dollar Spot Index was down 0.10% to $94.198, with the Oval Office and today’s stats the key drivers through the day, the Dollar sitting some way off 95 levels hit just last week.

Across the border, there are no material stats scheduled for release out of Canada, with U.S Dollar weakness easing pressure on the Loonie, which was up 0.03% to C$1.3293 at the time of writing.

While the Loonie may have steadied and recovered from C$1.33 levels, it’s certainly not out of the woods, with the effects of tariffs and lack of progress on NAFTA negatives near-term

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