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Market watch - 21st August 2019


The Dollar is trading just a hair softer against most rivals this morning in very tight ranges ahead of the key FOMC Monetary Policy Meeting Minutes due this afternoon at 2pm followed by Federal Reserve Bank Chairman Jerome Powell speaking from the Jackson Hole Symposium on Friday morning. President Donald Trump cancelled a trip to Denmark scheduled for two weeks from now after Danish Prime Minister Mette Frederiksen publicly stated that she will not discuss the “absurd” prospect of selling Greenland with Trump during the visit.  Existing Home Sales are scheduled for this morning along with Crude Oil inventories ahead of the key Fed monetary policy meeting minutes this afternoon, with Flash Services and Manufacturing PMI and CB Leading Index MoM data tomorrow before the key speech by Fed Chairman Powell speaking from the Jackson Hole Symposium Friday morning.


The Canadian Dollar is trading  a bit firmer across the board in tight market ranges after much better than expected domestic CPI MoM at +0.5% headline compared to +0.1% forecast while Core CPI MoM was released at +0.3% versus 0.0% previous.  WTI prices also hit their nine-day peak further supporting the CAD this morning.  The Loonie touched a fresh two-day high versus the Greenback, Euro, and Yen on the data almost immediately. Wholesale Sales MoM follows Thursday morning with the key Retail Sales MoM along with Corporate Profits QoQ due Friday morning.  The GDP MoM data is on tap for next Friday with market participants specifically focused on the Bank of Canada (BoC) monetary policy meeting announcement on September 4 to see if the BoC is likely to shift from its neutral stance in the near future given dovish policy elsewhere due to concern over US trade policy coupled with apprehension of a potential global economic slowdown.


The Euro is up just a few points in very tight ranges with the slightly weaker Dollar this morning but continues to be on its back foot in general after Italian Prime Minister Giuseppe Conte resigned amid the vote of no confidence which had been called by far right League party Deputy Prime Minister Matteo Salvini yesterday.   Notably Italian government bonds rallied because market expects a new coalition to be more pro-business. However, it is now down to Italian President Sergio Mattarella to try and form a new government or call for a general election. This adds political uncertainty to significant concern about Eurozone growth and inflation along with market expectations of European Central Bank (ECB) policy easing to be announced next month.  While there is no economic data for the European Union today we do have EU Flash Manufacturing/Services PMI ahead of the ECB Monetary Policy Meeting Accounts for tomorrow morning.


The British Pound is trading just a hair firmer as market participants brace for news from the meeting between new UK Prime Minister Boris Johnson and German Chancellor Angela Merkel this morning as Merkel did state yesterday the European Union would consider practical solutions to the Irish backstop which has become the major impasse to Brexit for now.  Sterling essentially matched its 13-day high versus the Greenback from yesterday but has settled a bit lower, while its trading few ticks softer with the Canadian Dollar and Euro this morning.  Public Sector Net Borrowing missed its mark at -2.0B compared to its -3.7B forecast consensus but was better than +5.7B upward revision to the reading from the previous month.


The Japanese Yen is trading in striking distance of its five-day low versus the Buck while USDCHF has ticked down from its 15-day peak yesterday as the Dollar sold off modestly in tight ranges despite the modest increase in risk appetite, while AUDUSD touched a one-week high, NZDUSD ticked up form its new two-week trough from the overnight session, USDZAR fell to its five day low, with USDMXN dipping to its two-day low on the increased risk tolerance overnight.  The Buck remains very close to its fresh 11-year peak with the Chinese Yuan form yesterday as the US-China trade war continues to remain unresolved for the moment.  The Aussie MI Leading Index MoM was better than last month at +0.1% compared to its -0.1% previous.  The Japanese Flash manufacturing PMI is scheduled for this evening along with All Industries Activity MoM early tomorrow morning with Australian Flash Services and Manufacturing PMI due tonight also.

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