Forex News

Oct. 19, 2018 (Western Union Business Solutions) – The U.S. dollar’s latest rally petered out as it encountered technical resistance. The U.S. currency was flat to softer against the euro and sterling, firmer against the yen and weaker against Canada’s loonie. Emerging markets also strengthened against the greenback. The broadly weighted U.S. Dollar Index overnight nearly pushed to fresh October highs, a move that would have lifted it to two-month peaks. The dollar was still on track for a winning week thanks to Fed minutes that pointed to the central bank raising rates at a steady pace over the coming year. Dollar sentiment remains positive with the American unit also benefiting from political risk in Britain and Italy. The uncertain geopolitical situation between the U.S. and Saudi Arabia points to more market volatility over the coming days. North America today releases data on U.S. existing home sales and potentially rate hike clinching data from Canada on inflation and consumer spending.

 

EUR

 

The euro overnight nearly fell through a key technical floor which would’ve shoved the single currency to two-month lows. It could be a matter of time before the euro falls through the bottom of its range after the EU signaled a thumbs down to Rome’s budget for the coming year. So far, the single currency appears to be taking the budget crisis in stride. However, things could quickly get out of hand if the market loses confidence in Rome’s ability to get its fiscal house in order, a scenario that could lead to markedly higher government borrowing costs and potentially spread contagion risk to other fiscally fragile nations in the bloc.

 

GBP

 

Sterling found enough support to keep it above a key psychological floor against the greenback. Sterling is set for a losing week after Britain and the EU failed to reach a compromise separation agreement, keeping alive the risk of a disorderly breakup. Meanwhile, Prime Minister Theresa May’s latest Brexit proposals of sounding amenable to extending the 21-month transition period didn’t sit well with some members of her Conservative party, which added a layer of sterling-negative political uncertainty.

 

CAD

 

The loonie tumbled to fresh five-week lows after disappointing data suggested less scope for area central bankers to raises rates beyond an expected increase next week. Inflation hit the brakes by slowing to an annual rate of 2.2% in September from 2.8%. Meanwhile, lower inflation failed to inspire consumers as retail sales unexpected contracted by 0.1%. While the data is unlikely to stay the Bank of Canada’s hand on rates next week, it suggests less scope for policymakers to tighten policy in the months ahead.


USA 

Oct. 17, 2018 (Western Union Business Solutions) – The U.S. dollar was the lead currency Wednesday with the stakes and tensions running high in Europe as another Brexit summit got underway. Nearly across the board gains buoyed the buck against the euro, sterling and Canadian dollar. The dollar also appreciated against the Aussie and kiwi dollars and emerging markets. However, U.S. stock futures pointing to a negative open after yesterday’s robust gains whet some appetite for the safer yen. While stronger, the dollar was confined to a horizontal range with its upside capped by mixed data. The buck’s fate today is seen hanging on the tone of the minutes from the last Fed meeting at which officials raised borrowing rates for the third time this year. Minutes suggesting solid conviction in the central bank pushing rates higher later this quarter and further over the coming year would tend to be dollar-positive.

 

EUR

 

The euro fell toward the bottom of a tight range as it largely shadowed sterling lower against the greenback. While the euro has shown a flare for acrobatics of late, having hit two-week highs this week, Italy’s precarious budget situation has fastened a lid on it. Euro zone inflation confirmed that prices grew by 2.1% annually in September but the more important core rate was a full percentage point lower at 1.1%, a decidedly benign level that keeps an ECB rate hike on a far, second half of 2019 horizon.

 

CAD

 

Canada’s dollar retreated from its highest in nearly two weeks as oil prices dipped, and the greenback enjoyed broad based gains. Market sentiment also turned cautious with Wall Street pointing to a negative open after yesterday’s massive gains. Oil prices were down nearly a percent to below $71.30. Downside for the loonie is likely to prove limited with the Bank of Canada expected to raise borrowing rates in a week.

 

GBP

 

Sterling wilted as another high stakes Brexit summit got underway between Britain and the EU. The Brexit parties remain at loggerheads over agreement on their divorce terms which is keeping alive the risk of a disorderly, no-deal outcome that is considered bearish for the pound. Sterling should serve as a barometer in today’s talks with declines signaling a greater risk of a messy outcome and a rise pointing to progress on a treaty. Sterling also suffered after U.K. inflation moderated more than expected to an annual rate of 2.4% in September, a marked slowdown from 2.7% in August. Core inflation slowed below the Bank of England’s 2% goal.

 

Oct. 11, 2018 (Western Union Business Solutions) – A subdued U.S. dollar slipped to one-week lows against the euro and to its weakest in three against the yen and sterling. However, the big selloff on Wall Street this week amid concerns that a sharp spike in U.S. bond yields could harm the world economy boosted the buck against commodity peers from Canada and Australia. The loonie slumped to two-week lows while the Aussie dollar kept near a 2 ½ year trough. The dollar tends to fare its best when markets slide and investors duck for cover in safer bets. But the buck has largely sat out the latest market meltdown as it’s helped coax Treasury yields down from multiyear peaks while signs of diminishing political headwinds in Europe buoyed the euro and sterling. While a tentative calm returned Thursday with U.S. bond yields down and riskier emerging market currencies higher, caution is likely to persist, particularly ahead of news today on U.S. inflation.

 

USD

 

Softer than expected U.S. data pushed the dollar to session lows. The rattled stock market may take comfort from the latest U.S. inflation data as consumer prices rose at an annual rate of 2.3% in September, below the last reading of 2.7%, and under forecasts of 2.4%. Less volatile core consumer inflation steadied at 2.2%. Weekly jobless claims rose more than expected to a still low 214,000. While inflation remains relatively take, its at risk of climbing given low unemployment and the strong economy. Still, until meaningfully higher inflation materializes dollar gains could be tougher to sustain beyond the near-term as benign price growth can reduce pressure on the Fed to raise rates.

 

JPY

 

The yen was among the winners of the global stock meltdown that started on Wall Street. The yen shines its brightest when the global outlook dims as risk-skittish investors seek traditional safe harbors such as the Japanese currency. The stampede to safety momentarily knocked USDJPY below a key floor that had held since mid-September. The longer volatility sticks around, the better the yen should fare over the near term.

 

GBP

 

Sterling rallied to three-week highs on signs that Britain and the EU might be on the brink of clinching a Brexit treaty over coming days. The pound continues to move in fits and starts in response to Brexit headlines. A securing of a Brexit agreement would represent a big step forward in Britain’s bid to leave the 28-country EU in March 2019. A trade deal would also help to instill some semblance of certainty for U.K. businesses, potentially easing a major headwind on Britain’s economy.

 

EUR

 

The euro scored one-week highs against the greenback, boosted by a reduction in political uncertainty in Italy and Britain. The euro managed a technical victory after it closed above a key support which offered scope for stabilization for a currency that’s fallen to seven-week lows. The euro got a lift from Italy’s economy minister who intends to win back market confidence in its handling of its budget battle with the EU. Italy’s budget crisis remains fluid, suggesting the euro isn’t out of the woods. The euro also rode the U.K. pound’s coattails higher as expectations grow for Britain and the EU to agree on a Brexit treaty.

 

CAD

 

Canada’s dollar tumbled to two-week lows as global growth fears flared and oil prices moderated. The price of crude was a percent lower to below $73 Thursday which depressed the value of commodity-oriented assets. Concerns about skyrocketing bond yields and no end in sight for the U.S.-China trade war have overshadowed Canada’s sturdy economic fundamentals and expectations for the Bank of Canada to raise borrowing rates for a third time this year on Oct. 24. Still, Canada’s bright fundamentals could help slow the loonie’s pace of decline.

Oct. 8, 2018 (Western Union Business Solutions) – The greenback extended a winning streak Monday in holiday-light trade while broader markets remained on a weaker footing. The euro and sterling slid 0.4% and 0.6%, respectively, with the former sinking below support to its lowest in seven weeks. The yen and other safe havens generally outperformed while the Canadian and Australian currencies lost ground. What’s been weighing on broader markets has been supporting the dollar: rising interest rates around the world for both fundamental and worrisome reasons. Italian borrowing rates have climbed, a sign of investor worry in the nation’s debt crisis. U.S. lending rates have risen but for fundamental reasons following bullish U.S. data. Numbers last week showed the lowest American unemployment (3.7%) in nearly 50 years. Moreover, global market weakness is spurring buying of the U.S. currency has a safe harbor. Focus of the week ahead will be U.S. consumer prices, a key gauge of inflation, on Thursday.

 

EUR

 

More weakness drove the euro to seven-week lows against the greenback. Markets are growing increasingly concerned about the shaky state of Italian finances which has led to rising borrowing rates for Rome. Even Europe’s fundamental narrative has shown mounting signs of weakness as data today from top economy Germany disappointed. A gauge of German factory growth unexpectedly fell in August and for the third month running. The euro fell through a key floor against the dollar which potentially sets the stage for further weakness over the coming days.

 

CAD

 

Canada’s dollar dipped to late September lows as oil markets moderated from multiyear peaks and the greenback remained in vogue after a week of mostly bullish U.S. data. Canadian markets have Monday off to celebrate the nation’s Thanksgiving holiday, so price action could prove limited. The odds of Canada raising borrowing rates in a little over two weeks, on Oct. 24, increased after local data last week showed faster than expected hiring of more than 60,000 jobs in September which lowered unemployment to 5.9%, one of the lowest levels in decades.

 

USD

 

The U.S. dollar started the week with broad gains as bullish fundamentals and skittish global markets offered twin pillars of support. The dollar is on a two-week winning streak, helped in part by solid jobs data last week that reinforced expectations for the Fed to lift U.S. borrowing rates. While September hiring underwhelmed with a gain of 134,000, the two prior months were upgraded by a robust 87,000 jobs, and unemployment fell more than expected to 3.7%, the lowest since the late 1960s. And while the lid remains fastened on inflation, prices could be poised to rise given the ultra-low level of joblessness. That puts the focus on consumer prices Thursday. Core inflation is forecast to accelerate to a 2.3% annual rate for September from 2.2%.

 

JPY

 

The yen strengthened above late 2017 lows as global stocks slumped which buoyed demand for a broad range of safer bets like the Japanese currency. But rising U.S. interest rates bode negatively for the yen given how USDJPY is highly sensitive to yield differentials. The yield on America’s 10-year Treasury remained above 3.20%, the highest since May 2011. That compares to the yield on Japan’s 10-year government bond of less than 0.2%. The yen’s rise in the face of yield disparities underscores how markets are more concerned about safety, with many global stocks in the red.

 

GBP

 

Sterling lost ground as caution returned and the greenback remained on a multiweek winning streak. Sterling has recently outperformed thanks to upbeat remarks from EU leaders who have noted scope for a potential Brexit deal by November. Yet until an elusive deal is signed and delivered it will leave sterling vulnerable. Once Brexit and the EU hammer out a trade agreement it would still need to be approved by the U.K. Parliament which remains divided over the type of Brexit to pursue.

Oct. 1, 2018 (Western Union Business Solutions) – A dip in USDCAD to 4-month lows below 1.28 has moved the Value Indicator which in turn could do the same for those USD or CAD buyers that have been sitting on the fence.

The so-called Value Indicator – which is based on moving averages and offers a rough estimate of currency strength – is flashing undervalued after the big move lower in USDCAD. This is good news for USD buyers who are less than a month removed from the market being above 1.32. CAD buyers, on the other hand, continue to benefit from USDCAD having started 2018 below 1.26, amounting to a YTD gain of nearly 2%.

The tentative trade agreement reached between the U.S. and Canada has allowed a big cloud of uncertainty over the latter to dissipate. The trade deal, dubbed the U.S.-Mexico-Canada Agreement, still needs to be ratified by lawmakers. The USMCA reduced trade uncertainty and put the focus on Canada’s sturdy economy and expectations for the Bank of Canada to raise interest rates as soon as its next decision on Oct. 24.

USDCAD could see more volatility later this week when the U.S. and Canada release influential data Friday on jobs and trade, numbers that could also impact the interest rate outlook on both sides of the border.

If indeed USDCAD is undervalued, it could be evident in how it responds to the U.S. and Canadian labor market reports on Friday. Oct. 5, at 8:30 am, EST. The U.S. economy is forecast to add 180k new jobs in September from 201k in August, while the unemployment rate is expected to decline from 3.9% to 3.8%.

 

Sept. 26, 2018 (Western Union Business Solutions) – The U.S. dollar initially weakened after a somewhat dovish rate hike by the Federal Reserve.

As expected, America’s central bank raised its base rate to 2.25% from 2%. The Fed’s statement noted a strong U.S. economy with upgrades to its growth forecasts for this year and next year. However, the Fed’s policy stance is no longer ‘accommodative,’ which sent a signal to markets that it could be closer to ending its rate hiking cycle that started in late 2015.

 

While the Fed removed the “accommodative” language from its statement, the rest of it largely maintained the status quo, resulting in the limited impact, so far, on the U.S. currency. However, the notion that the Fed may be closer to the end its policy tightening cycle could leave the dollar vulnerable to further downside risk over the coming days and weeks.

 

Strong growth led the Fed to reaffirm plans to raise rates one more time this year and do so three times in 2019. The Fed’s final two announcements of the year are on Nov. 8 and Dec. 19.

Sept. 20, 2018 (Western Union Business Solutions) – The U.S. dollar crashed to new lows as it deepened a September slide. The mostly weaker dollar slipped to fresh multiweek lows against the euro and Canadian dollar and fell to its weakest in two months against the data-powered British pound. An easing in global risks has kicked away a leg of support for the safer U.S. currency. While the U.S. and China stepped up their trade quarrel this week, the modest tariff increases were considered less draconian than expected and thus likely to have only a muted impact on global growth. Sterling soared more than a percent to mid-July highs after unexpectedly bullish U.K. retail sales depicted a resilient consumer, a positive sign for third quarter growth. Oil near recent multimonth peaks above $71 buoyed Canada’s commodity dollar. Also in focus today: central bank decisions in Norway, Switzerland and South Africa, an EU Brexit summit, and a slew of U.S. data.

 

GBP

 

Sterling soared to 2 ½ month peaks on a somewhat rare of late double-dose of optimism on Brexit and the U.K. economy. Retails sales unexpectedly rose with a 0.3% increase in August while the July reading got upgraded to nearly 1%. The spending splurge bodes well for faster growth during the third quarter. Meanwhile, Brexit parties are meeting today with hope intact for officials to move toward a trade deal before long.

 

CAD

 

Canada’s dollar flirted with three-month highs on the back of buoyant oil markets and the flimsy greenback. Oil topped $71, one of the highest levels in two months. Mix in cautious optimism about Nafta negotiations in Washington and solid Canadian data this week making a stronger case for an imminent rise in area borrowing rates and it’s no surprise to see the loonie gain traction. Those gains will be tested Friday in northern numbers on inflation and retail sales. A solid set of data, which is generally on the cards, would all but cement a rate hike to 1.75% from 1.50% on Oct. 24, the next Bank of Canada meeting.

 

AUD

 

The Aussie dollar appreciated to three-week peaks as global risks abated as markets took the latest match of tariff tennis between Washington and Beijing in stride. Antipodean currencies also basked in the afterglow of stronger than expected second quarter growth from neighboring New Zealand whose economy expanded at a 1% rate, an amount two times faster than the 0.5% pace during the first quarter. Still, tepid fundamentals point to longer run headwinds on both the Aussie and kiwi on the perception that their respective central banks are a long way from raising interest rates from historic lows.

 

USD

 

Stronger than expected U.S. data helped to slow the dollar’s bleeding. Weekly jobless claims unexpectedly improved, hitting a new low of 201,000 the healthiest since the late 1960s. The Philly Fed index showed faster than expected growth. The numbers continued to bark a familiar refrain of a strong U.S. economy that could lead the Fed to accelerate the pace of rate hikes which is positive for the buck and could help to slow its weekslong descent.

 

EUR

 

The euro pushed to 2 ½ month highs as the descended to new lows. The euro largely benefited from the greenback’s retreat while it enjoyed spillover support from sterling strength against the buck. While the euro has inched higher over recent days, it’s struggled to close above key thresholds. Nevertheless, the euro’s power play today bodes better for its technical prospects.

 

NOK

 

Norway’s krone fell broadly, even against the weaker greenback, after the nation’s central bank deployed a ‘dovish’ rate hike. The Norges Bank raised its benchmark rate to 0.75% from 0.50% but it sketched a slower pace of rate increases in the months ahead which disappointed Norwegian bulls. Consequently, the greenback rebounded above 7-week lows hit this week.

Sept. 17, 2018 (Western Union Business Solutions) – The U.S. dollar slipped toward multi-week lows as trade tensions dominated, pushing to the side optimism over the world’s biggest economy. The dollar weakened toward two- and six-week lows against the euro and sterling but was mostly steady versus counterparts from Japan and Canada. Media reports indicated a likelihood of the U.S. slapping more tariffs on imports from China as soon as this week, a move that could lead Beijing to cancel plans to meet with U.S. officials later this month. Trade friction overshadowed bullish U.S. news last week on the consumer showing solid spending and upbeat attitudes that pointed to strong growth over the summer quarter. The market also seems inclined to lock in dollar gains made since the spring ahead of next week when the Federal Reserve meets and is expected to raise interest rates for the third time this year.

 

USD

 

The dollar teed off the week on its back foot as trade tensions overshadowed a generally bullish set of U.S. data Friday on the economy-driving consumer. The market also seems inclined to book some profit on the trade-weighted dollar’s gains of about 5% since April. Low unemployment below 4% looms as an upside risk to inflation, a scenario that has the market pricing a more than 90% likelihood of the Fed raising rates next week to 2.25% from 2%. The Fed’s new forecasts, which it will unveil next week, will be important for the dollar’s coming prospects.

 

JPY

 

The yen kept near a seven-week bottom against the greenback with USDJPY taking its main cue from yield differentials. America’s 10-year Treasury topping 3% underpinned the buck against its lower yielding Japanese rival. Meanwhile, the Bank of Japan this week meets and its expected to leave its base lending below zero when it renders its policy decision Wednesday. Japan is not expected to join the Fed in normalizing monetary policy for a while yet, a factor that serves as an underlying headwind on the yen. By Contrast, a U.S. rate hike is considered a near certainty next week.

 

CAD

 

Buoyant oil prices near $70 offered support to Canada’s commodity-influenced currency. Canada’s economy will be in the limelight with data Friday on consumer inflation and retail sales. The data, if solid like the forecasts expect, could put an imminent rate hike more firmly on the table and buoy the Canadian dollar. Ahead of the late week numbers, markets were pricing about a 70% likelihood of a rate increase to 1.75% from 1.50% when bankers next meet on Oct. 24.

 

EUR

 

The euro firmed toward late August highs against the dollar, helped by data confirming higher overall inflation in the euro zone last month which validated ECB confidence in the outlook for price growth. Data confirmed that euro zone inflation rose at an annual rate of 2% in August, which just topped the central bank’s target of being a whisker below that level. However, the less volatile core gauge of inflation grew at a subdued rate of 1%, a low level that keeps an ECB interest rate hike on a distant horizon.

 

GBP

 

Sterling pushed to within reach of seven-week peaks. The pound kept on elevated terrain as the latest Brexit headlines have sounded a constructive tone, bolstering expectations for Britain and the EU to eventually reach a pound-positive trade deal as soon as the weeks ahead. Fundamentals will help impact the pound with U.K. data Wednesday on inflation and Thursday on consumer spending. Forecasts call for inflation to continue its moderating trend while modest contraction is on the cards for retail sales. Lower inflation and weaker spending would reinforce the low rate outlook for Britain, a scenario that could leave sterling vulnerable.

Sept. 6, 2018 (Western Union Business Solutions) – The dollar came under pressure on mixed data showing benign inflation and strong job growth. Core consumer prices rose at an annual rate of 2.2% in August, down from 2.4% in July. Weekly jobless claims unexpectedly declined by a thousand to a healthy 204,000. The overall robust set of data keeps the Fed on track for a rate hike when it announces its next decision on Sept. 26.

 

CAD

 

The loonie was little changed after flirting with two-week highs this week. Oil prices backpedaled from two-month peaks above $71, the main force behind the commodity-linked currencies tepid tone Thursday. Reports of constructive Nafta negotiations have also been loonie-positive. Downside appears limited for Canada’s currency, given the prevailing view of area interest rates rising from 1.50% as soon as next month.

 

GBP

 

Sterling rose to six-week highs after the Bank of England left interest rates unchanged at 0.75%. The BOE’s statement flagged higher uncertainty related to Brexit which hinted at borrowing rates remaining low over the foreseeable future, a dovish outlook when weighed against the rate rising U.S. central bank. Sterling continues to hover toward the north end of its range on the notion that Britain and the EU might be on a somewhat faster track to a trade deal.

 

EUR

 

The euro strengthened to two-week highs after the ECB left policy unchanged and set the stage for the central bank to end its monthly bond buying stimulus at the end of the year. The ECB will halve its monthly bond buys from €30 billion to €15 billion starting in October with plans, economy-permitting, to conclude the program at the end of 2018. The bank’s new forecasts showed only modest downward revisions to 2018 growth (2.0% vs 2.1%) while it left unchanged its outlook for inflation to grow at a 1.7% pace this year and over coming years. Mr. Draghi voicing confidence in inflation eventually meeting its near 2% goal was well received by euro bulls who bid the single currency higher.

 

AUD

 

The Aussie dollar recovered from 2 ½ year lows, finding helping hands on the nation’s job market and a reduction in U.S.-China trade tensions. Australia added 44,000 jobs last month that were mostly the more meaningful full-time positions which easily exceeded forecasts of a gain of 15,000. Faster hiring didn’t impact unemployment which remained at 5.3%. Washington invited Beijing back to the negotiating table, a development that’s helped to temper concerns about a potential world economy-squeezing trade war.

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly flat as declines versus the euro, sterling and Norwegian crown offset gains against the Swiss franc and Australian dollar. Canada’s dollar hovered near late July lows with firmer oil above $68 helping to slow its descent. Market players are cautiously dipping a top into riskier waters, partly on signs that Italy might pursue fiscal prudence when Rome releases its 2019 budget in coming weeks. Easing concerns about the fiscal shape of the euro zone’s third biggest economy helped to eclipse ongoing trade war concerns that have rattled markets. Norway’s crown was a session standout performer after hotter than expected area inflation increased the risk of an interest rate hike from 0.50% next week. While steady, the greenback retained a bullish bias after strong U.S. jobs data last week validated Fed plans to raise interest rates a few more times this year.

 

GBP

 

Sterling firmed as it built on last week’s gain that came from reduced uncertainty related to Brexit. While Brexit remains a source of uncertainty for the pound, optimism is cautiously on the rise that Britain and the EU might ultimately find enough middle ground to agree on a trade deal in time to avert a potentially disorderly divorce. Sterling’s nascent upturn could hinge on U.K. unemployment data Tuesday and Thursday when the Bank of England issues a policy decision. No change in rates from 0.75% is expected but the tone of the central bank minutes could impact the pound.

 

USD

 

The greenback was mostly flat after a jobs-inspired rally Friday. Dollar fundamentals remains bullish after data showed the U.S. economy added more than 200,000 jobs in August while unemployment kept below 4% and the nearly 3% rise in wages marked the fastest pace in years. The data cemented expectations for the Fed to raise rates to 2.25% from 2% on Sept. 26 and keep the door wide open for further increases in December and 2019. The buck this week will take its cues from consumer prices Thursday and retail sales Friday.

 

CAD

 

Canada’s dollar underperformed and kept within arm’s reach of late July lows. The loonie lost ground after disappointing jobs data last week somewhat clouded the outlook for an imminent rise in domestic interest rates from 1.50%. Canada unexpectedly shed more than 50,000 jobs in August. But the fact that all the job losses came from less meaningful part time positions didn’t torpedo prospects of a rate hike to 1.75% as soon as Oct. 24.

 

EUR

 

The euro firmed after an overnight flirt with three-week lows. The euro bounced above multiweek lows on signs that Italy’s new coalition government would respect EU rules when it unveils its budget for next year some time over the coming weeks. Consequently, government borrowing costs declined, a sign of decreased investor worry that supported the euro. The ECB issues a decision Thursday. While area borrowing rates are expected to remain anchored at zero well into 2019, the central bank’s assessment of the growth outlook, if brighter, could be positive for the euro.

 

CHF

 

A 0.5% decline in the Swiss franc pulled the Alpine currency down from 5-month peaks hit last week. Haven assets are underperforming their riskier counterparts, like stocks, partly on diminished concerns about fiscal uncertainty in Italy, the euro zone’s No. 3 economy. Downside for the swissie could prove modest given persistent worries about a global trade war.