Japan

Nov. 27, 2018 (Western Union Business Solutions)  – The U.S. dollar was mostly steady while the U.K. pound broke below support, hitting its lowest level in nearly two weeks. The greenback otherwise was little changed against the euro, yen and Canadian dollar. Broader market sentiment was subdued following a strong day on Wall Street. The dollar remains well supported by elevated political uncertainty in Europe. Still, dollar gains have been capped by caution ahead of a speech Wednesday, at noon ET, by Jerome Powell, the head of America’s central bank. There’s a risk that Mr. Powell could tone down his optimism about the U.S. economy with global growth showing steady signs of slowing. Lots of risk events loom over the balance of the week, including Thursday when the U.S. issues data on the consumer, inflation and the minutes of the last Fed meeting, and Friday when the G20 meets in Argentina where President Trump and China’s president are expected to discuss their trade feud.

 

GBP

 

The pound ‘s 0.5% slide led major currencies lower, underscoring how the weekend Brexit agreement between the U.K. and EU didn’t prove to be a game changer for sterling. Moreover, comments from President Trump this week highlighted an uncertain outlook for trans-Atlantic trade to the detriment of the pound. It may be a while yet before Britain can negotiate trade deals with its non-EU counterparts.

 

CAD

 

Canada’s dollar steadied after an overnight brush with one-week lows. Oil prices softened after a Monday rally which kept commodity currencies on a vulnerable footing. Oil’s recent slide to almost below $50 from above $75 in recent weeks was the chief catalyst that knocked the loonie to late June lows last week. Canadian growth data Friday will shed some light on the local interest rate outlook, a narrative that’s proven loonie-positive following five rate increases by the Bank of Canada since mid-2017.

 

EUR

 

Like sterling, the euro also flirted with two-week lows against the greenback. The euro’s quick start to the week faded after remarks from Mario Draghi, the president of the ECB, played up economic fragility. Mr. Draghi’s comments Monday came on the same day that Germany released another lackluster report on business confidence. Meanwhile, Italy’s precarious budget situation has done little to inspire buying of the single currency.


USA 

Nov. 15, 2018 (Western Union Business Solutions)  – Sterling was spellbound, alternating between gains and losses, after Britain’s Brexit minister resigned. Heightened political uncertainty in the UK kept the pound on volatile ground. In the face of much scepticism amongst her own government, UK Prime Minister Theresa May was able to jump the first hurdle of many by securing cabinet approval of her draft Brexit agreement. GBP/USD oscillated between gains and losses in choppy trading, lacking any directional impetus either way. GBP/EUR continued to wrestle with a key level but was still unable to close above it – a feat last achieved in April. Despite approval from the cabinet, expected resignations by disgruntled cabinet ministers weighed on Sterling. The threat of hard-line Brexiteers calling for a no-confidence vote on Ms May could also derail Brexit developments and send Sterling southwards.

 

Today, Ms May will present the draft Brexit deal to the House of Commons and a vote in parliament is expected in December. There is increasing doubt over the divorce deal passing through parliament, which is unnerving investors and limiting Sterling gains. According to a Reuters report, demand for Sterling put options (the right to sell Sterling) is increasing, which is a tell-tale sign that market participants lack confidence in the pound recovering. UK retail sales for October unexpectedly fell by 0.5%, adding to the pound’s shaky bias. Yesterday, Sterling shrugged off inflation data, which held steady at 2.4% in October rather than rising to 2.5% as forecast. It appears that Sterling volatility is directly correlated to Brexit news though, leaving GBP traders vulnerable to both substantial upside and downside risk.

 

USD

 

US inflation increased by the most in nine months in October, which helped to temporarily stall the US Dollar’s recent decline from traders’ taking profit. The consumer price index rose by 2.5% from 2.3% y/y, encouraging investors about a path of gradual rate hikes by the US Federal Reserve. The US Dollar index, which tracks the dollar’s value against a basket of six currencies, powered to over 16-month highs on Monday, which prompted investors to take profit on the move higher, in other words selling the dollar and thus weakening it. However, despite dropping slightly, the US Currency remains near 2018 highs against its major currency rivals such as the Euro, Yen, Sterling and Canadian Dollar. The US today issues its monthly report on retail sales at 8:30 a.m. ET. Forecasts predict brisk spending of 0.5% in October, from the previous month’s 0.1% increase. Evidence of faster consumer spending, the main engine of US economic growth, would tend to be dollar-positive and a potential catalyst to keep the US unit near 2018 peaks.

 

EUR

 

The Euro attempted a further recovery yesterday following the relatively positive Brexit developments, however upside appears limited in the wake of the continued standoff between Rome and Brussels regarding Italy’s budget proposal. Italy ramped up tensions by re-submitting its budget plan to the European Commission with no changes to its deficit or growth targets. The original proposal was rejected by the Commission last month as it broke EU fiscal rules and therefore disciplinary steps may now be taken against Rome, which could result in a weaker Euro. The uncertainty and hostility rumbling on in Europe is unnerving investors and putting increased downside pressure on the common currency. EUR/USD momentarily recaptured a key level, which appears to be a level of both support and resistance. Meanwhile, data yesterday revealed the Eurozone grew at the slowest pace in four years in the third quarter. GDP in the common currency bloc expanded by just 0.2% between July and September. The slowing economic growth combined with the jitters resurfacing from Italy could force the European Central Bank to postpone its planned monetary tightening next year might, which would also hurt the Euro in the long run.

Nov. 12, 2018 (Western Union Business Solutions)  – The US Dollar continues to gain strength against its major currency rivals after the US Federal Reserve (Fed) reaffirmed the need to raise interest rates at a gradual pace last week. The expectations of a rate hike in December lifted and the monetary policy divergence between Europe and America widened, allowing the dollar to appreciate. Demand for the dollar continues to swell as the US Dollar index, which tracks the value of the dollar against a basket of currencies, climbs to new 16-month highs around 97.50 this morning.  Data from America this week includes inflation data on Wednesday, retail sales on Thursday and industrial production on Friday.

 

EUR

 

The Euro has fallen to a fresh 16-month low against the US Dollar this morning, tumbling as investors increase demand for dollars in the current uncertain climate in Europe. As well as sterling, the euro is also suffering amid the rising risks of a no-deal Brexit. The standoff between Rome and Brussels over Italy’s controversial new budget plan is also weighing on the common currency. Tensions and risks are rising as the European Union gave Italy until Tuesday to present a revised version of the budget.  The data docket is quiet across the board today, but tomorrow’s German inflation figures and ZEW survey will kick start another busy data week from Europe. On Wednesday, flash German GDP data will be revealed alongside the Eurozone’s industrial production figures and the blocs overall GDP number. The week will wrap up with a raft of inflation data, but most notably the overall Eurozone core inflation number is forecast to remain well below the European Central Bank’s target of near 2%, which could add to the Euro’s woes.

 

GBP

 

Renewed Brexit uncertainties continue to plague the British Pound this morning. A Reuters report over the weekend revealed that Moody’s rating agency has warned that the risk of a no-deal Brexit has risen sharply. It appears that UK Prime Minister Theresa May has been forced to abandon plans for a special cabinet meeting to approve a Brexit deal this week and a number of British ministers are threatening to quit again, ramping up the pressure on Ms May and weakening sterling as a result.  This week, investors will also be eying the important UK economic data released from Tuesday onwards. Tomorrow, UK average earnings and unemployment data could give the pound some support as wage growth is forecast to remain above 3%. UK inflation data will be released on Wednesday with a small uptick expected, which could offer sterling additional support. Retail sales data will be revealed on Thursday.

Nov. 8, 2018 (Allthingsforex.com) – The USD extended its gains, pushing the EUR back under 1.14, following Fed’s decision to maintain the benchmark interest rate in its current range between 2% and 2.25%, but keeping the door open to a rate hike at its next meeting on December 18.

Below is the official FOMC Statement released by the central bank earlier today:

“Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 2 to 2-1/4 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.”

 

Nov. 7, 2018 (Western Union Business Solutions)  – The U.S. dollar slumped to multi-week lows after America’s midterm vote yielded a split Congress. The dollar slid broadly, hitting two- and three-week lows against the euro and sterling and its weakest in three months versus the Aussie and kiwi dollars. Canada’s dollar appreciated while emerging markets also outperformed the greenback. America has spoken and awarded the House of Representatives to the Democrats. Republicans maintained control of the Senate. The mixed result suggests an uphill battle for President Trump to deliver more economy-boosting stimulus, a scenario that could mean less economic horsepower and less leeway for the Federal Reserve to raise borrowing rates. The mixed vote also points to a period of dollar-negative political uncertainty if Democrats use their clout to investigate the president. Downside for the greenback could prove somewhat limited ahead of the Fed which begins a two-day meeting today that will conclude Thursday with a decision on interest rates.

 

USD

 

The strong dollar suffered a setback after America’s midterm election yielded a divided government that pointed to political gridlock ahead. With Democrats regaining control of the House from Republicans it could make it harder on the president to advance his growth-positive agenda. The specter of less horsepower for the world’s biggest economy could potentially hasten the end of the Fed’s rate hiking era. For now, though, the U.S. economy remains in a high gear, something that could lead the Fed this week to reiterate an optimistic outlook and stay on course for a December rate hike.

 

CAD

 

Canada’s dollar turned higher against its political-injured U.S. counterpart. Broad-based greenback weakness helped to push oil markets higher, giving the loonie an added boost. Canada’s economy will be in focus today with a gauge of business sentiment due at 10 a.m. ET. The Ivey PMI barely grew last time, with a reading of 50.4 in September, holding just the 50 level that separates boom from bust. The index could be primed for a bounce back in October after the U.S. and Canada forged a new trade agreement.

 

NZD

 

The kiwi dollar soared to three-month highs and led gains against the U.S. currency. The kiwi received a data-inspired jolt after New Zealand reported a 3.9% jobless rate during the third quarter, the lowest in a decade, a stronger than expected showing that all but shut the door to a local rate cut from 1.75%. While New Zealand’s central bank mulls a policy decision Thursday, it’s not expected to alter borrowing rates but officials could sound more confident in the wake of the stellar jobs news.

 

YEN

 

The yen steadied above one-month lows hit overnight as the dollar emerged broadly weaker after America’s midterm vote yielded a divided government. Dollar losses were modest and kept the U.S. currency above key levels against the yen. Gains could be tough to sustain for the yen with the Fed now in focus. America’s central bank embarks on a two-day meeting today that will conclude Thursday with an afternoon decision on interest rates. The Fed is not expected to increase rates just yet but an upbeat message would open the door wider to a rate hike in December, a narrative that’s long proven dollar-positive.

 

EUR

 

The euro rolled to two-week peaks after the dollar succumbed to political risk in the wake of America’s mixed election outcome. Meanwhile, the single currency enjoyed a data lift with German industrial output topping forecasts. America’s midterm vote merely dimmed the political spotlight on Italy, a debt-choked nation that’s in a battle with Brussels over its spending plans, a factor that could keep a relatively low ceiling above the single currency.

 

GBP

 

Sterling rallied to three-week highs against its U.S. rival as political uncertainty increased on the left side of the pond. Sterling sentiment has brightened at the margin as markets see potential scope for a Brexit deal in the weeks ahead, a treaty that would go some way in allaying pound-negative political risk. Still, the risk is still alive of a no deal outcome, a scenario that would pose a potentially significant downside threat to the U.K. economy. And even if a Brexit treaty is reached, it would still need to be ratified by area parliaments which could prove a daunting task.

 

Oct. 29, 2018 (Western Union Business Solutions)  – The U.S. dollar was camped near multi-month highs after U.S. data printed close to forecast. Consumer income and spending both rose in September while underlying inflation held at the Fed’s 2% sweet spot. Key for the buck this week will be Friday’s October employment report. America’s economy likely added 190,000 jobs in October after it netted 134,000 in September, the fewest in a year. Unemployment is expected to remain at 3.7%, the lowest in nearly 50 years. Wages are forecast to rise at an annual rate of 3.1% from 2.8%. Wage growth above 3% could provide a recipe for dollar strength as it would hint at rising inflation and keep the bar low for the Fed to deliver a fourth interest rate hike of the year in December.

 

CAD

 

Canada’s dollar steadied above six-week lows, but sentiment remained fragile with oil struggling to sustain gains. Oil around $67.50 swung between modest gains and losses. The loonie will look to Canadian growth for August, due Wednesday with forecasts pointing to a 0.0% reading after a 0.2% increase in July. An underwhelming outcome would raise the bar for the Bank of Canada to raise rates after its increase last week to 1.75%.

 

EUR

 

The euro stuck near two-month lows as uncertainty over the head of Germany’s conservative party increased political uncertainty across the continent. Reports today indicated that Angela Merkel may not seek re-election as chair of the Christian Democratic Union. Uncertainty over the outlook for German leadership added to persistent concerns about Brexit and Italy’s budget battle with the EU. European fundamentals, whose tepid shape has pressured the euro, will be in focus this week with midweek data on euro zone inflation and unemployment.

 

GBP

 

Sterling was camped near two-month lows against the strong U.S. dollar. The pound has been in a downtrend since mid-October as a lack of progress with respect to Brexit negotiations has kept uncertainty at an elevated level. The longer it takes for London and Brussels to clinch a Brexit treaty, the greater the risk of no deal, a scenario that could hasten a disorderly exit from the bloc come March. The Brexit fog over Britain points to the Bank of England leaving its main interest rate unchanged at 0.75% on Thursday.

 

Oct. 24, 2018 (Allthingsforex.com) – The Italian budget woes and a disappointing drop in the Eurozone PMI served as catalysts for the EUR to break below support, sending the single currency under 1.14 in today’s trading session.

The CAD rallied following the Bank of Canada’s decision to raise its benchmark rate to 1.75% from 1.5% and signalling that more rate hikes may come in the future. Canada’s loonie ended its recent losing streak and managed to push the USD sub- 1.30.

Below is the official monetary policy statement as published by the Bank of Canada earlier this morning:

“The Bank of Canada today increased its target for the overnight rate to 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.

The global economic outlook remains solid. The US economy is especially robust and is expected to moderate over the projection horizon, as forecast in the Bank’s July Monetary Policy Report (MPR). The new US-Mexico-Canada Agreement (USMCA) will reduce trade policy uncertainty in North America, which has been an important curb on business confidence and investment. However, trade conflict, particularly between the United States and China, is weighing on global growth and commodity prices. Financial market volatility has resurfaced and some emerging markets are under stress but, overall, global financial conditions remain accommodative.

The Canadian economy continues to operate close to its potential and the composition of growth is more balanced. Despite some quarterly fluctuations, growth is expected to average about 2 per cent over the second half of 2018. Real GDP is projected to grow by 2.1 per cent this year and next before slowing to 1.9 per cent in 2020.

The projections for business investment and exports have been revised up, reflecting the USMCA and the recently-approved liquid natural gas project in British Columbia. Still, investment and exports will be dampened by the recent decline in commodity prices, as well as ongoing competitiveness challenges and limited transportation capacity. The Bank will be monitoring the extent to which the USMCA leads to more confidence and business investment in Canada.

Household spending is expected to continue growing at a healthy pace, underpinned by solid employment income growth. Households are adjusting their spending as expected in response to higher interest rates and housing market policies. In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.

CPI inflation dropped to 2.2 per cent in September, in large part because the summer spike in airfares was reversed. Other temporary factors pushing up inflation, such as past increases in gasoline prices and minimum wages, should fade in early 2019. Inflation is then expected to remain close to the 2 per cent target through the end of 2020. The Bank’s core measures of inflation all remain around 2 per cent, consistent with an economy that is operating at capacity. Wage growth remains moderate, although it is projected to pick up in the coming quarters, consistent with the Bank’s latest Business Outlook Survey.

Given all of these factors, Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target. In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt. In addition, we will pay close attention to global trade policy developments and their implications for the inflation outlook. ”

 

Oct. 24, 2018 (Western Union Business Solutions) –  For the first time ever, the European Commission has requested a euro area country to revise its draft budget plans. Italy is not backing down though, and the far-right Deputy Prime Minister Matteo Salvini believes the new measures are necessary to restore economic growth. The proposed budget deficit of 2.4% of GDP is triple the amount forecast by the previous government. Despite being below the 3% deficit limit under eurozone rules, the Commission has given Italy three weeks to present a new plan or face possible fines.   A Reuters report suggested Brexit will be completely overshadowed if the Italian budget crisis escalates.  Italy’s debt to the European Central Bank (ECB) is vast and it is unlikely the central bank will want to buy more Italian bonds than planned. The ECB is expected to end its quantitative easing programme by year-end, making its policy meeting an important event tomorrow.

 

CAD

 

The Bank of Canada is expected to increase interest rates from 1.5% to 1.75% today at 10am EST. A rate hike today could help the Canadian dollar strengthen having been under heavy selling pressure due to a run of poor economic data and the recent fall in oil prices.

 

EUR

 
Economic growth fears in the Eurozone have caused the euro to continue to slide against a basket of currencies. During European trading PMI surveys across the Eurozone showed growth had slowed much faster than originally anticipated, German private sector growth reported slowing to the lowest level in over three years while manufacturing in France hit a two year low. Unsurprisingly market reaction has been unfavourable for the euro, causing it to slide 0.8% against the dollar.

 

GBP

 
Prime Minister Theresa May will meet with conservative lawmakers at a private meeting in parliament as she seeks to calm growing tensions over her Brexit strategy. Ms May will address the “1922 Committee” of backbenchers in her conservative party and attempt to convince them agree to with her proposal. A vote of no-confidence against the PM would be triggered if 48 conservative lawmakers submit letters to the chairman of the 1922 committee to demand such a vote. The Sunday Times said 46 have already been sent. If the PM is unable to convince the Tory backbenchers to support her, this could become a huge risk to the PM’s job and to Sterling.

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.

Oct. 18, 2018 (Western Union Business Solutions) –  The U.S. dollar steadied after a Fed-inspired surge overnight to one-week peaks. The greenback was mostly flat against rivals from Europe, Japan and Canada after pushing to its strongest levels since at least Oct. 11. The Aussie dollar was an outlier with gains of its own that came on the back of bullish domestic jobs data. America’s currency got a lift from the latest Fed minutes that showed policymaking mulling how high to boost borrowing rates with the economy in strong shape. The positive for the buck was that the minutes toyed with the notion of increasing rates so high that it restrains growth to ensue the lid stays on inflation. The dollar succumbed to some profit-taking ahead of a slew of U.S. data Thursday on weekly jobless claims, the Philly Fed index and leading indicators.

 

GBP

 

Sterling descended to one-week lows after a high stakes Brexit summit came and went with little to no progress. Adding salt to the pound wounds: U.K. retail sales disappointed with a bigger than expected fall by 0.8% in September, the weakest in 6 months. The data came on the heels of British inflation slowing toward the Bank of England’s 2% goal which fit with the outlook of area borrowing rates staying put over the foreseeable future, a dovish view compared to the hawkish Fed that’s on track to raise rates again this year. The prospect of prolonged uncertainty over Brexit bodes negatively for sterling’s coming prospects.

 

CAD

 

A sharp slide in oil knocked Canada’s commodity-driven currency to one-week lows. Oil moved below $69 a barrel Thursday, a day after staging a 3% plunge. A lack of meaningful Canadian data until tomorrow has led the loonie to take its main cue from oil markets. Come Friday, underlying Canadian inflation is forecast to remain around 2%, the Bank of Canada’s sweet spot, while retail sales are expected to rise by a solid 0.3% for a second straight month. Outcomes near or better than expectations would help to green light a rate hike to 1.75% from 1.50% on Oct. 24 when the central bank issues its next policy decision.

 

JPY

 

The yen tracked major currencies lower against the greenback which clocked one-week peaks versus its Japanese rival. The yen tested the weaker end of its range after the latest Fed minutes showed widespread conviction in policymakers boosting borrowing costs at a continued gradual pace over the coming year which differs from the outlook for Japan where interest rates are expected to remain below zero for the foreseeable future to support the world’s tepidly growing No. 3 economy. Still, downside for the yen has been capped by volatile stock markets, suggesting USDJPY strength may come in dribs and drabs.

 

USD

 

Better than expected U.S. data kept the dollar near one-week peaks. The decline in weekly jobless claims to 210,000 from a revised 215,000 was better than forecasts of a print of 212,000. The Philly Fed index of Mid-Atlantic factory growth slowed less than expected to 22.2 for October, above forecasts of 20.5. The data fit with the thesis of a strong economy and the Fed pushing rates higher over coming quarters.