Trade War Jitters Ease, Supporting the USD and Appetite for Risk

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, limited to Japan’s current account figures for February.

Japan’s adjusted current account surplus narrowed from ¥2.02tn to ¥1.02tn, which was worse than a forecasted narrowing to ¥1.39tn, while the unadjusted current account surplus widened from ¥0.607tn to ¥2.076tn.

The Japanese Yen moved from ¥106.97 to ¥107.001 against the Dollar upon release of the figures, with appetite for the Yen reversing through the Asian session as the market jitters over the possibility of a trade war eased at the start of the week. At the time of writing, the Japanese Yen was down 0.09% to ¥107.03 against the Dollar.

Elsewhere, the Aussie Dollar was up 0.1% to $0.7692, supported by a pickup in commodity and oil prices and the shift in sentiment towards the prospects of a trade war, with the Kiwi Dollar rallying 0.47% to $0.7297 at the time of writing.

In the equity markets, the Hang Seng led the way through the session, rallying 1.76%, with the Nikkei and ASX200 also in positive territory ahead of the close.

The Day Ahead:

For the EUR, economic data scheduled for release this morning is limited to Germany’s February trade figures, which are forecasted to be EUR positive, with the ECB’s Constancio also scheduled to speak later in the day.

Following some weak data out of the Eurozone of late, particularly out of Germany, a widening in the trade surplus would certainly be welcomed ahead of the ECB meeting minutes release on Thursday, with the markets looking for any hints of a shift in sentiment towards the ECB’s outlook for deposit and interest rates.

ECB member Constancio could drive demand for the EUR should there be any talk of a need to lift rates, some members of the ECB having already made insinuations of a need to revise policy in the latter part of the year.

At the time of writing, the EUR was down 0.05% to $1.2275, with improving market risk appetite easing demand for the EUR through the early part of the day.

For the Pound, economic data is limited to March house price figures that are unlikely to have a material influence on the Pound through the day, the markets needing to wait for Thursday’s release of trade and manufacturing production figures for direction from the stats.

At the time of writing, the Pound was up 0.01% to $1.4094, with last week’s disappointing figures having had a relatively muted impact on the Pound, the focus last week having been on the trade war chatter.

For the U.S Dollar, a lack of material stats through the afternoon will leave the Dollar in the hands of the U.S administration and any more noise on trade tariffs. Trump’s tweeting over the weekend certainly eased some of the fear of a trade war, providing the Dollar with support in the early part of the day.

Friday’s nonfarm payroll figures may have disappointed, but with wage growth on the bounce in March, the slower pace of hiring will need to be followed up with another soft number in April for the markets and the FED to take a more bearish outlook on policy through the remainder of the year.

At the of writing, the Dollar Spot Index was up 0.06% to 91.6, as the markets also begin to consider the release of March inflation figures and the FOMC monetary policy meeting minutes on Wednesday.

Across the border, stats out of Canada include March’s housing starts figures and the release of the Bank of Canada’s Business Outlook Survey. Focus will likely be on the Business Outlook Survey, which will give the markets some insight on where the businesses see the economy heading that will influence sentiment towards monetary policy.

At the time of writing, the Loonie was up 0.07% to C$1.2773, with a pickup in crude oil prices and positive sentiment towards NAFTA negotiations providing support at the start of the week.