Euro and dollar outperform while safe haven underperforms
Fed Minutes point to ongoing trade concerns, worries markets pricing in too many interest rate cuts.
EUR/USD: Euro outperforms against the FX majors, but the greenback not that far off
Yesterday evening's US Federal Open Market Committee (FOMC) minutes gave further insight into the division regarding last month's 0.25% rate cut, with members expressing concern over trade, and that markets are pricing in more rate cuts than the Federal Reserve (Fed) may deliver – they’re already majority pricing in another 0.25% rate cut for the next meeting at the end of this month. This was following Tuesday's Chairman Powell speech where the central bank may expand its balance sheet to aid any short-term funding woes. Now it's the European Central Bank's (ECB) turn to release its minutes, preceded by Eurozone data and followed by Consumer Price Index (CPI) figures out of the US. The euro’s relative outperformance against the remaining FX majors aided long traders in taking profit, and hence retail sentiment is down 4% and close to the middle.
GBP/USD: Pound underperforms against the US dollar
Tuesday's plummet in the pound following negative Brexit news ensured the pound lagged the most, and yesterday morning's rumors of internal cabinet resignations in the UK government kept the pound under pressure, though nothing has emerged as of yet. And while the overall focus will remain on Brexit, there will be UK data released today including Gross Domestic Product (GDP) figures for the month of August expected to show no growth, and manufacturing data expected to continue to show contractions. The Bank of England's (BoE) governor Carney will also be speaking later in the day.
USD/JPY: Trade talks likely to keep the pair volatile
Yesterday's Fed minutes ensured the greenback relatively outperformed, and in equities the response was volatile movement following Tuesday's rout that aided the safe haven yen (and franc) in relatively outperforming in the FX market. But instead of outperforming yesterday, the yen was the worst performer amongst the FX majors, and any positive result from US-China trade talks could send this pair’s price significantly higher, and keep conformist volatile breakout strategies for limited profit-taking more ideal than fading ones. China has lowered its expectations going into the event, but that’s no guarantee it won’t end well.
USD/CAD: Volatile moves in this pair’s price
With an absence of Canadian data, it was the Fed's minutes influence on the US dollar and Energy Information Agency's (EIA) on oil (and hence CAD's energy underlying) that kept this pair volatile, but overall within relatively consolidatory ranges, and with a dearth of Canadian data and US tier 1 CPI figures this evening, the focus won't be on the Canadian dollar until tomorrow's Canadian employment figures release. Of course, should trade talks fail to yield anything and oil prices might be in for a retracement, which could take this pair's price higher and aid its positive technical bias on both the daily and weekly levels.
AUD/USD: Appetite for riskier assets up this morning
The moves have been predominantly consolidatory absent any fresh trade news or optimism for this pair's price, and in terms of data this morning's Australian home loans data showed lower than expected growth. Trade talks are crucial for the commodities market, and hence for the commodity currency Australian dollar, with this pair's price volatile and sandwiched between a weekly bear trend channel and a daily mid-term support level. While expectations aren't high for any US-China trade breakthrough, should it occur, and contrarian breakout strategies will be far more ideal. The technical overview is a stalling bear trend, but technicals mean less in the face of fundamental forces whose underlying in this case would be trade talks.
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