Rates: Awaiting Trump’s verdict on additional tariffs
Investors await US President Trump’s verdict later today to push through with imposing tariffs on an additional $200bn of Chinese goods. Some cautiousness might be warranted in the run-up, suggesting a slowdown/reversal of the past days’ sell-off in core bonds. US eco data have the potential to offset some of the potential safe haven flow impact.
Currencies: Dollar still looking for direction despite lingering global uncertainty
The dollar failed to record broad-based gains even as EM tensions persisted and as global equities remained under pressure. EUR/USD even rebounded north of 1.16. US eco data might confirm a healthy US economy today. However, global (FX) trading will probably focus on the next steps in the US trade policy
The Sunrise Headlines
- Major US equity indices closed with (marginal) losses on Wednesday with NASDAQ (-1.19%) underperforming. Asian markets extended the trend this morning, with all major indices opening in red.
- Delegations from North and South Korea had constructive talks yesterday in Pyongyang. They have set a date for a third meeting between Kim Jong Un and his southern counterpart President Moon Jae-in, for September 18-20.
- Canada’s Foreign Minister Freeland will continue trade negotiations with the US today. US President Trump told reporters that trade talks with Canada “were coming along” and expects a result in the next few days.
- Trump said last week he is ready to impose tariffs on $200bn more of Chinese goods once the public comment period on the plan ends. That period ends today, though it remains unclear how quickly possible tariffs could go into force.
- Argentina’s economy minister said the negotiations to speed up the IMF’s $50bn aid package are making progress. He also denied that Argentina is possibly receiving a loan from the US, as media reported earlier.
- A German official overturned earlier rumours that Germany was ready to accept a less detailed agreement on future trade ties with the EU, saying Germany’s position is unchanged. The pound lost earlier gains on the news.
- Today’s eco calendar in the US contains Jobless Claims and ISM Non-Manufacturing Index for August, while Fed’s Williams speaks at the university of Buffalo. ECB’s Lautenschlager speaks in Vienna
Currencies: Dollar Still Looking For Direction Despite Lingering Global Uncertainty
USD still going nowhere despite risk-off
On Wednesday, safe haven flows initially supported the dollar. EM tensions persisted and EUR/USD dropped below 1.1550. However, the dollar again couldn’t hold to its gains. Later, the euro even took the lead. Headlines on Italy turned constructive as the government indicated to comply with EU budget rules and a Bloomberg article suggested that Germany and the UK would ease their demands in order to make it easier to reach a brexit separation deal. Equity sentiment remained fragile with US tech stocks selling-off. Still, the USD stayed in the defensive against the euro. EUR/USD closed at 1.1630 (from 1.1582). USD/JPY held up well despite the tech sell-off, closing at 111 53. This morning, Asian equities show modest additional losses. At the same time, the sell-off in EM currencies looks like easing. EUR/USD maintains yesterday’s gain and trades in the 1.1630 area. The yen is gaining a few ticks as the BOJ executed a regular bond buying operation. Today, the US eco calendar is well filled with the ADP jobs report, jobless claims, ISM non-manufacturing and final US orders data. However, (US) eco data often had only a limited impact on FX trading off late. The focus of global markets was/is on EM and on the US trade policy (negotiations with Canada/implementation of additional tariffs on China). Both issues (EM & trade tensions) remain on the radar. Usually, this kind of uncertainty is USD supportive. However, recent USD performance was far from convincing. At the same time, pressure on the euro due to uncertainty on Italy is apparently easing, at least for now. We maintain the working hypothesis that EUR/USD 1.1791/1.1850 resistance will be tough for EUR/USD short-term and keep a cautious USD positive bias. However, recent price action suggests fortunes for the dollar might change if global uncertainty (trade & EM) were to ease.
Yesterday, sterling rebounded temporary on a Bloomberg report that the UK and Germany might have agreed to allow a less detailed brexit deal, raising chances to reach a deal. EUR/GBP dropped temporarily to the 0.8960 area. However, the report was questioned by other soruces. EUR/GBP closed the session at 0.9012. There are no UK eco data today. We don’t give too much weight to yesterday’s report and don’t change our cautious attitude on sterling. The 0.91 area remains the next point of reference if sentiment on sterling deteriorates further. EUR/GBP 0.9306 is key. A break would suggested real brexit panic.
EUR/USD: dollar shows no clear trend despite persistent global uncertainty
