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Global market watch - 20th August 2018

The Buck sold off a bit versus nearly all if its rivals on Friday afternoon and is fairly level this morning after that move as risk aversion firmed reflected by higher equities in the UK, Europe, along with favorable pre-market domestic equity futures.  The Greenback has retraced a bit this morning after it touched a 10-day low in its pairing with the Euro overnight before EURUSD retraced a bit lower, hit a fresh 6-day low versus the British Pound, traded to a fresh 5-day low against the Loonie on Friday, a 4-day trough in its pairing with the Yen on Friday afternoon, largely sideways versus the Swiss Franc, remains close to the one-week low against both the Aussie Dollar and Mexican Peso on Friday, and an 11-day trough against the Kiwi in the overnight session.  That said, other than the Yen which has benefited from general market uncertainty, the Dollar remains elevated this month against most rivals compared to previous levels.  The Buck continues to benefit in general from a flight to quality on the uncertainty from the Turkish economic crisis, high chance of a “no deal” Brexit at this time, along with the developing US-China trade war fueling risk aversion at the moment.  The President also tweeted last week that “money is pouring into our cherished Dollar like rarely before” after criticizing hawkish Federal Reserve Bank monetary policy because it is underpinning the Buck earlier this month very publicly which is fueling some uncertainty about whether President Donald Trump supports a strong USD or not.  The relatively light economic data week is highlighted by the release of the Federal Reserve Monetary Policy Meeting Minutes Wednesday afternoon, the Flash Manufacturing and Services PMI on Thursday morning along with the beginning of the Jackson Hole Symposium as well, the volatile Durable Goods Orders MoM on Friday morning along with Federal Reserve Chairman Jerome Powell scheduled to speak as well.

The Canadian Dollar is trading stronger, trading close to the 5-day high in its pairing with the Greenback from Friday afternoon, on ever improving NAFTA sentiment as reflected by the Mexican Peso strengthening also, the blockbuster Canadian headline CPI MoM on Friday at +0.5% on only +0.1% forecast consensus firming expectations of more rate hikes form the Bank of Canada (BoC) in the near future, along with firmer oil prices as well.  The Loonie also managed to firm to a nearly 5-day low versus the Euro, along with trading at a nearly 5-day high versus the Japanese Yen also.  On the data front, the Bank of Canada (BoC) Governing Council Member Carolyn A. Wilkins is scheduled to speak this morning, Wholesales Sales on Tuesday morning, the key Canadian Retail Sales MoM release on Wednesday, the Corporate Profits QoQ number Thursday morning along with the start of the Jackson Hole Economic Symposium in Wyoming starting.   Then BoC Governor Stephen Poloz also set to speak on Saturday early afternoon. 

The Euro managed to trade up to a 10-day high in its pairing with Buck overnight before receding back a bit, ticked down versus both the stronger CAD and GBP, was a touch softer versus the generally firm Japanese Yen, while losing a little ground with the Swiss Franc overnight.  Despite the recovery overnight, the Euro is broadly weaker in recent weeks as a result of the Turkish crisis as EU banks have significant lending exposure there, the new Italian government blaming the European Union for the tragic bridge collapse while also stating they would not stick to EU fiscal rules, along with the fear of how a disorderly Brexit will affect the region as well.  German PPI MoM was lower than anticipated today at +0.2% compare to +0.4% consensus, and German Buba President Jens Weidmann commented on Saturday that the real interest rate is indeed negative now which combined to help EURUSD fall from its overnight highs.   Mr. Weidmann who is the front runner to replace European Central Bank (ECB) president Mario Draghi is set to speak at mid-day today.  The EU data release schedule for this week is highlighted by Flash Eurozone Services and Manufacturing PMI data combined with the key ECB Monetary Policy Meeting Accounts set for Thursday morning along with the beginning of the Jackson Hole Symposium

The Pound recovered a bit overnight to a six-day high versus the Greenback this morning, was a touch stronger against an otherwise firm Canadian Dollar, and ticked up in its pairing with the generally firmer Euro as well.  This could be a temporary relief rally based on some general Dollar selling combined with profit taking on the nearly 3% drop in Cable over the past few weeks. There is continued fear of a “no deal” Brexit at the moment, the recent Bank of England (BoE) rate hike was seen as dovish and limited, and despite a record low UK Unemployment Rate there is general feeling that workers are stretched as wage growth is not keeping up with inflation.  In addition, the fact that European Union citizens who work in the UK are leaving at the fastest pace ever reflects the general concern at this time over the exit process.  The light data week started off with the UK Rightmove HPI MoM coming in much worse than previous at an 8-monht low of -2.3% versus the -0.1% figure last month.  The Public Sector Net Borrowing and CBI Industrial Order Expectations data re on for tomorrow, CBI Realized Sales are set for Thursday along with the start of the Jackson Hole Symposium, with only High Street Lending on Friday morning.   

The Buck is trading in striking distance of the one-week low on Friday versus the Aussie Dollar while falling to a key 11-day trough against the Kiwi as firmer copper, oil, and gold prices coupled with more risk appetite assisted the antipodean Commodity Currencies overnight.   That said, the softer central bank policies from the RBA and especially the dovish RBNZ along with market uncertainty is keeping both of them close to their very significant lows against the Buck at this time. The data week is highlighted by RBA Governor Philip Lowe scheduled to give a speech this evening followed by the release of the RBA Monetary Policy Meeting Minutes as well, the New Zealand Retail Sales QoQ release on Tuesday night along with the GDT price Index, with the key New Zealand Trade Balance set for Thursday afternoon.

The Yen firmed versus the Dollar, Loonie, and Euro this morning despite slightly improved risk appetite as uncertainty abounds in financial markets with the Turkish economic crisis, the US-China trade war, heightened Brexit uncertainty, the new Eurosceptic Italian government loudly proclaiming they are no interested in following European Union Budget rules, along with another modest drop in US 10-year Treasury yields supporting the Japanese Currency.  Economic data this week is highlighted by the All Industries Activity MoM on early Wednesday morning, then Flash Manufacturing PMI on Wednesday evening, followed by the National Core CPI YoY on Thursday night our time.  Once again risk-on versus risk-off is likely to influence the firm Japanese Yen now.

The Swiss Franc traded largely sideways in its pairing with the Buck while falling a touch against the Euro along with Sterling on improved risk tolerance overnight.  Another light data week for Switzerland is here with only the Trade Balance scheduled for Tuesday morning.  Therefore it will likely be all about risk aversion for the Franc this week.

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