05/ 11/ 2019

Trade Hopes Fuel Rally, Focus Shifts to Economic data with USD waiting for better opportunities

The euro declined against the U.S. dollar on Monday, as investors awaited Christine Lagarde’s first speech as European Central Bank president, but hopes that the United States may choose not to impose tariffs on auto imports kept it near its highest level in weeks. Lagarde gives her first speech   as ECB chief, and markets are assuming she will stick with the easy policy script of her predecessor, Mario Draghi. Market players are confident the US and China will be able to sign an agreement this month that would be the beginning of the end of the trade war. Also, US Commerce Secretary Wilbur Ross said that he hopes enough progress has been made in trade negotiations with the Union to avoid tariffs on EU imported vehicles. The pound slipped against the dollar, as investors’ attention turned on political developments as election campaigning gets under way. With just over five weeks until the UK heads to the polls on Dec. 12, the Conservative party is leading in the polls and the risk of a “no-deal” Brexit is considered to have been reduced. The British currency slid to as low as $1.2886, down 0.35 percent on the day.

It’s a busy day ahead on the economic calendar. From US, Key stats include September trade data, finalized Service Sector, and Composite PMI numbers and the markets preferred ISM Non-Manufacturing PMI. We can expect the ISM Non-Manufacturing PMI to have the greatest influence on the day.

04/ 11/ 2019

Week Ahead | US Dollar Gives Back NFP Gains After ISM Manufacturing PMI Miss

The euro gained against the dollar on Friday, after data showed a mixed view on the economy, and as optimism that the United States and China will reach a deal to end their trade war reduced safe-haven demand for the greenback. The dollar initially gained after U.S. jobs growth slowed less than expected in October, while wages gained and hiring in the prior two months was stronger than previously estimated. The Fed met on Wednesday and, as expected, it cut rates by 25bps to between 1.5% and 1.75%. It was the third rate cut this year, and the accompanying statement suggested that policymakers are done for now, as Powell said that the current level is “likely to remain appropriate,” in line with the Fed’s expectation of moderate economic growth.

Powell said that they would need to see a “really significant move up in inflation,” before considering raising rates to address inflation concerns. The dollar’s collapse came after these last words, signaling no rate hikes in the foreseeable future.An upbeat Nonfarm Payroll report helped the USD recover some ground on Friday, as the economy added 128K new jobs in October, while September figure was upwardly revised to 180K from 136K. Meanwhile, European data released these days was mildly encouraging but continued signaling slowing growth in the Union.

It’s another busy week ahead. Geopolitics will certainly test risk appetite early on, with earnings, the BoE and RBA, and economic data in focus.

31/ 10/ 2019

Sterling Boosts after Boris Johnson's Approval in UK Parliament & Dollar Slips on Fed Rate Cuts

The dollar dipped against a basket of major currencies on Wednesday late session, reversing earlier gains, after the Federal Reserve cut interest rates for the third time this year but signaled its rate-cut cycle might be at a pause, as was broadly expected. The U.S. central bank dropped a previous reference in its policy statement that it “will act as appropriate” to sustain the economic expansion - language that was considered a sign for future cuts. Still, lack of an explicit signal from the Fed that it is done with easing for now was perceived to be less hawkish than expected, helping to drive the dollar down. The dollar also temporarily dipped on news that Chile has withdrawn as host of an APEC trade summit in November where the United States and China had been expected to take major steps toward ending a 15-month-old trade war.

Sterling edged up after British Prime Minister Boris Johnson won parliamentary approval on Wednesday to hold a general election in December, though moves were limited as large currency options expiring this week curbed volatility.

It’s a busy day ahead on the economic calendar with GDP numbers out of the Eurozone likely to set the tone for Lagarde, who takes over as ECB President. Later this morning, the BoJ is also due to deliver its October monetary policy decision that will garner plenty of interest. Outside of the numbers, the markets continued to react to the FED rate cut from Wednesday.

30/ 10/ 2019

Dollar treads careful ahead of Fed Rate Cuts & Sterling Steadies

The dollar traded narrowly as markets braced for a rate cut by the Federal Reserve later on today, while sterling steadied as Britain heads for an early general election the prime minister hopes will break the deadlock over Brexit. The U.S. central bank is expected to cut rates for a third time in a row when it concludes its two-day meeting this day. “With a cut today completely priced in, markets are looking to the Fed’s stance on its policy outlook, was stated by Market Strategists.The Fed will probably try to avoid sounding too dovish. Its message will essentially be that while it could act in December if needed, it won’t unless there are big uncertainties on the economy.

After EU’s approval of the request to extend Article 50 for another three months (January 31, 2020), the UK parliament passed a bill calling for early elections on December 12. The market remained cautious about these moves with both sterling and euro moving in narrow ranges. The best outcome for sterling is a Tory majority. This scenario signals a higher chance that the government withdrawal deal can be passed in the parliament. While opinion polls support this case, the actual election outcome can be surprising. Passage of the deal will lead to the second phase of negotiation, EU-UK trade relations. This is the most critical stage of Brexit negotiation. We expect sterling to remain volatile.

A busy day ahead on the economic calendar will keep the markets busy ahead of the main event which is the FOMC interest rate decision and the release of the rate statement, however. Expectations are for a 25 basis point rate cut. A hawkish rate cut could well give the Dollar a nudge northwards.