Market Overview

Yen surges broadly together with Swiss Franc as there are renewed focus on the tension between US and North Korea. US President warned overnight that North Korea "best not make any more threats to the United States". And, Trump said that "they will be met with fire, fury and, frankly, power the likes of which this world has never seen before." That's in response to North Korea's claim that it's ready to give US a "severe lesson". And North Korea claim that it's examining plans to strike US territory Guam. Analysts perceived Trump's response as aggressive. The comments sent DOW down to closed -0.15% lower at 22085.34, comparing to intraday high at 22179.11. USD/JPY breached 109.83 and is resuming recent decline from 114.49.

Sterling suffers renewed selling in generally quiet markets today. EUR/GBP is extending recent rise to as high as 0.9080 so far. GBP/USD is set to test on 1.3 handle. GBP/JPY is the biggest mover today as also affected by broad based rebound in yen. GBP/JPY's break of 144.01 near term support now opens up deeper fall to trend line support at around 142.00. Staying in the currency markets, New Zealand Dollar remains the weakest one as markets anticipate a dovish RBNZ statement later in the week. Canadian Dollar is the second weakest one as WTI crude oil continues to struggle to regain 50 handle. Euro is maintaining its status as the strongest one for the week while Dollar is mixed.

Dollar trades generally lower today after cautious comments from Fed officials. But New Zealand Dollar is even weaker as markets are preparing themselves for a dovish RBNZ rate statement later in the week. At the same time, weak China data is weighing on Aussie. Canadian Dollar also continues to pare back recent gains and as oil consolidates ahead of the release of the OPEC/non-OPEC meeting statement. Euro, Yen and Sterling are so far the relatively firmer ones, with Euro having an upper hand. The economic calendar is rather light for today and trading could remain subdued in summer mood.

Dollar is trying to regain momentum against most major currencies entering into US session, except versus Euro and Swiss Franc USD/CAD takes the earlier today by breaking last week's high. GBP/USD follows closely by taking out last week's low. Meanwhile Euro is so far trading firm against others. In particular, EUR/GBP is also resuming last week's rally and breaches 0.9050. Commodity currencies are trading generally soft today. In other markets, gold continues to hover in tight range between 1260/5. WTI crude oil's sideway consolidation extends and dips below 49 handle. Oil will take some more time to consolidate before having another attempt on 50 handle.

The financial markets are trading in risk-on mode as another week starts, boosted by last week's record run in US equities. In addition to being supported by the set of solid job data, comments from White House economic adviser Gary Cohn also provided some optimism to investors. Nonetheless, in the currency markets, Dollar has turned into consolidative mode instead and is waiting for fresh inspirations. Euro, on the other hand, is regaining some growth. New Zealand Dollar and Yen are trading as the weakest ones so far. In other markets, gold failed to stand firm above 1280 handle last week and retreated on Dollar's rebound. it's hovering in tight range of 1260/5 for the moment. WTI crude oil is also struggling to regain momentum for another attempt of 50 handle yet.

Dollar staged a strong rebound towards the end of the week as boosted by an overall set of solid job data. While the greenback still ended lower against Euro for the week, it's now looking likely that the greenback has found a short term bottom already. It's still early to confirm a trend reversal for Dollar yet. And we believe the key lies in the yet to be confirmed fiscal policy of US President Donald Trump. But for now, Dollar will probably gyrate higher in the early part of this week until CPI release on Friday. On the other hand, while Euro ended the week as the strongest currency, its rallies against Dollar, Yen and even Swiss Franc are starting to look tired. Sterling ended the week generally lower after markets perceived the BoE Super Thursday as a dovish one. But commodity currencies were even weaker with Canadian Dollar starting to pare back the strong gains in the past two months.

Dollar is given a lift in early US session by a set of overall solid employment. After initial hesitation, the greenback is gaining some upside momentum with GBP/USD dropping through 1.3096 minor support. USD/CHF also breaks last week's high at 0.9726 to resume rebound from 0.9347. Focus will now turn to 110.97 minor resistance in USD/JPY and break there will indicate near term bottoming. EUR/USD, though, stays firm above 1.1722 minor support and it's near term bullishness remains relatively safe.

Focus of the market will turn back to US economic data today. Economists expect non-farm payroll to show 180k growth in the US job markets in July, down from prior month's 222k. Unemployment rate is expected to drop to 4.3%. Average hourly earnings are expected to grow solidly by 0.3% mom. Looking at other employment related data, ADP private job growth slowed to 178k in the same month, down from 191k. Nonetheless, the three month average of ADP rose 10k from 191k to 201k. Employment component of ISM manufacturing dropped to 55.2, down from 57.2. Employment component of ISM services also dropped to 53.6, down from 57.8. Initial jobless claims were steady though, with four month average improved from 244k to 242k. Conference board consumer confidence also rose from 117.3 to 121.1. Other employment related data were mixed in general. Also from US, trade balance will be released.

Sterling tumbles sharply as markets perceive BoE announce as a rather dovish one. BoE left monetary policy unchanged at widely expected. Bank rate is held at 0.25% and asset purchase target at GBP 435b. The rate decision came with 6-2 vote as generally expected. Ian McCafferty and Michael Saunders maintained their push for a 25bps hike. Chief economist Andy Haldane, who sounded hawkish recently, didn't vote for a hike. New comer Silvana Tenreyro didn't follow her predecessor Kristin Forbes and, voted for unchanged.

Sterling is trading as the second strongest currency for the week so far, next to Euro, as markets await BoE Super Thursday. While monetary is widely expected to be unchanged, the vote split and inflation report will catch all attention from the markets. Meanwhile, commodity currencies are generally lower even though risk appetite remains firm in the stock markets. DOW extended its record run and closed up 0.24% at 2201.24, above 22k handle. US treasury yields were mixed with 10 year yield closed up 0.011 at 2.262. In other markets, Gold dipped notably and is trading below 1270. WTI crude oil recovered after a steep dip earlier this week to below 48.50. WTI is currently trading at 49.4 and struggles to regain 50 handle.

Dollar is steady in early US session and is little affected by job data miss. The ADP employment report showed 178k growth in private sector jobs in July, below expectation of 190k. DOW futures also stay steady and the index could have a go at 22000 handle today as recent rally extends. Non-farm payroll to be released on Friday is a key event to watch. And it's expected to show 180k growth overall in July.

Yen falls sharply in Asian session on risk appetite flows. Strong earnings from Japanese companies lifted Nikkei back above 20000 handle as the index is trading up 0.6% at the time of writing. That followed another record close in DOW overnight, at 21963.92, up 0.33%. Euro is benefiting most from the developments, in particular, with EUR/JPY finally taking out 130.76 resistance to resume recent rally. Markets will have an eye on German DAX today, which rebound by 1.1% yesterday. That mark the complete of a recent correction and if that's the case, strength in DAX would likely support the Euro further. Meanwhile, Dollar also recovers mildly today, against most except Euro as markets await ADP private employment data from US. Talking about employment, New Zealand Dollar is trading as the weakest one as dragged down by Q2 job data.

European majors are generally the strong ones this week so far. While Euro and Sterling lost some intraday momentum after yesterday's rally, they're both remain firm as supported by solid economic data. ON the other hand, While data from US are not too back, the greenback is being pressured by the political drama in the White House. Aussie is leading commodity currencies down as RBA warned of its recent appreciates in the rate decision statement.

Dollar suffered another round of selloff against Euro, Sterling and Yen yesterday as the political drama in White House continued. Australian Dollar jumps earlier today as lifted by better than expected data from China. But there is no follow through buying after RBA stands pat and warns of recent appreciation in the exchange rate. Sterling is also trading mildly higher as markets await UK manufacturing data. Euro also stays strong ahead of Q2 GDP. WTI oil price surged through 50 handle overnight but provides little boost to Canadian Dollar, as USD/CAD is struggling in tight range around 1.2460 key support level

Yen and Dollar trade mildly firmer today as markets are staying consolidation mode ahead of the key events ahead, including RBA, BoE and US NFP. Economic data from Eurozone are positive but provide little inspiration to the common currency. Meanwhile, commodity currencies are trading generally lower even though WTI crude oil extends recent rise and breaches 50 handle briefly. Released from Canada, IPPI dropped -0.1% mom in June, below expectation of -0.3% mom. RMPI dropped -3.7% mom, below expectation of -2.2% mom.

Dollar recovers mildly today but momentum has been weak. There is no change in it's general down trend against Euro, Yen and Sterling. And, not the mention the greenback's weakness against Canadian and Aussie. Political uncertainty in US is one of the key factors in limiting any rebound attempt in the greenback. Fed fund futures are now pricing in less than 50% chance of another rate hike by end of the year. And indeed, markets are starting to question that even if Fed does hike, the sluggish inflation outlook will keep it standing pat next year. The drama in the White House seems never-ending with US President Donald Trump replacing his chief of staff Reince Priebus last Friday. Retired General John Kelly was installed in the place. Some analysts noted that could be a turning point for Trump as he's now shaking up his top team.

While there were quite a number of key events last week, Swiss Franc came up as the surprised biggest mover. The Franc tumbled broadly as safe haven funds flowed out in accelerated pace. Franc has indeed ended the week down over -3% against Sterling, Aussie, Canadian, Kiwi and Euro. Against Yen and Dollar, Franc closed down -2.8% and -2.4% respectively. Dollar ended as the second weakest one as FOMC statement was taken as a dovish one while GDP price data missed. Also, continuous political drama in the White House means that there is still no clear light on when US President Donald Trump's tax reform would be implemented. Commodity currencies closed generally higher as supported by surge in energy and metal prices. Nonetheless, another surprise was that Sterling ended as the strongest one as it recovered on position squaring ahead of BoE Super Thursday.

Dollar is set to end the week as the second weakest currency as slightly better than expected growth data provides little support. Q2 GDP grew 2.6% annualized, up from prior 1.4% and versus consensus of 2.5%. However, GDP price index slowed to 1.0%, down from 1.9% and below expectation of 1.3%. Employment cost index rose 0.5% in Q2, also below expectation of 0.6%. Subdued inflation will affirm the case for Fed to starting shrinking the balance in September first, and leave another rate hike to December. This will give Fed more time to assess inflation and growth outlook before raising interest rates. Also from US session, Canada GDP rose 0.6% mom in May, much stronger than expectation of 0.2% mom.

Selloff in Swiss Franc continued overnight and weakness extends into Asian session. EUR/CHF is trading up over 300 pts, or 2.75% for the week. As we noted before, the strong break of 1.12 handle is now setting up the stage for EUR/CHF to head back to prior SNB floor at 1.2. USD/CHF's break of 0.9699 resistance also argues that the down trend from 1.0342 has completed and reversed after defending 0.9443 key support level. Oversold condition could start to limit selling in the Swiss Franc and we might see Franc crosses slow down a little bit before ending the week. Focus will be turned back to US with Q2 GDP data featured.

The spotlight moves back to the Swiss Franc today as EUR/CHF surges past 1.12 key resistance level. The cross is now setting up the momentum to regain 1.2 handle in medium term, which is the prior SNB imposed floor. Back in January 2015, SNB shocked the market by removing the floor and EUR/CHF dived to as low as 0.86, depending that what chart you read. With all the improvements in Eurozone, fundamentally, politically and system-wise, it now looks like there is no longer the need of safe haven parking in the Franc, with negative interest rates. The surge in commodity and energy prices would also help lift Eurozone inflation which keep ECB on course for stimulus exits.