FOREX: USD Breaks To August Lows as Markets Resolve Around Sept Fed Cut
Aug-22 16:26
- The USD sank sharply against all others on Friday, falling sharply following Powell's appearance at the Jackson Hole Policy Symposium. In acknowledging that the balance of risks to the US economy has shifted, he signaling a much higher likelihood of a rate cut at the Fed's September meeting - helping OIS markets resolve pricing and send the dollar lower in the process. Immediate strength in EUR/USD put the pair through yesterday's highs to narrow the gap with 1.1693, the next upside level intraday. The move coincides with a firm rally for equities - putting the E-mini S&P within range of the weekly high at 6484.25.
- The price action was backed up by a follow-up claim from Trump that he will fire Fed's Cook should she not resign - adding to the evidence that Trump may look to build a corner of policymakers within the FOMC that favour his view of lower rates for the US economy. Rates markets built in expectations for not just a September rate cut, but additional easy policy into year-end - with over 50bps now well priced.
- Second to USD weakness, CAD also trade poorly as softer oil prices countered any bullish signal from slightly better-than-expected retail sales data as well as Carney's decision to unilaterally remove retaliatory tariffs against US imports. Gains this week in USDCAD and the breach of resistance at 1.3879, the Aug 1 high, marked a positive development, however the slippage into the Friday close undermines this sentiment - for now. Moving average studies have crossed and are in a bull-mode position, reinforcing current conditions. An extension higher would signal scope for a climb towards 1.4019, a Fibonacci retracement. On the downside, support to watch lies at 1.3769, the 50-day EMA - a level not yet challenged by the correction lower.
- Focus in the coming week shifts to any further policy signaling from central bank officials at Jackson Hole. BoE's Bailey, ECB's Lagarde, BoJ's Ueda, Riksbank's Thedeen and several more FOMC members are in attendence - meaning it should be a busy weekend for central bank commentary. A UK Bank Holiday should keep markets set for a quieter start to the week, but German IFO, US consumer confidence, Australian CPI and European inflation numbers are all due - as well as NVIDIA's earnings release.
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EGBS: Sell-Off Extends On US-EU Trade Deal Hope After The Cash Close
Jul-23 16:25
- RXU5 has continued its decline after the EGB cash close, most recently touching a low of 129.85 (~70 ticks lower than pre-headline levels).
- Bloomberg reporting has more recently built on the FT piece five minutes ahead of the cash close re progress towards a US-EU trade deal.
- It takes it closer to support at 129.73 (Jul 21 low) after which lies 129.08 (Jul 4 low).
LOOK AHEAD: Thursday Data Calendar: Weekly Claims, S&P Mfg/Sevices PMI, 10Y TIPS
Jul-23 16:20
- US Data/Speaker Calendar (prior, estimate)
- 07/24 0830 Chicago Fed Nat Activity Index (-0.28, -0.15)
- 07/24 0830 Initial Jobless Claims (221k, 226k), Continuing Claims (1.956M, 1.954M)
- 07/24 0945 S&P Global US Mfg PMI (52.9, 52.7), Services PMI (52.9, 53.0)
- 07/24 1000 New Home Sales (623k, 650k), MoM (-13.7%, 4.3%)
- 07/24 1100 Kansas City Fed Mfg Activity (-2, 0)
- 07/24 1130 US Tsy $95B 4W & $85B 8W bill auctions
- 07/24 1300 US Tsy $21B 10Y TIPS auction (91282CNS6)
- 07/24 ---- Building Permits (1.397M, 1.397M), MoM (0.2%, 0.0%)
- Source: Bloomberg Finance L.P. / MNI
TARIFFS: US And EU Closing In On 15% Tariff Deal - FT
Jul-23 16:08
The Financial Times reports that the United States and European Union are closing in on a deal that would impose 15% tariffs on European imports, potentially heading off a threat issued by President Donald Trump earlier this month to hit the EU with a 30% tariff rate on August 1.
- FT notes: "Both sides would waive tariffs on some products, including aircraft, spirits and medical devices... [sources] said they understood the 15 per cent minimum tariff would include those existing duties, so Brussels views the deal as cementing the status quo. Tariffs on cars, which are currently 27.5 per cent, would therefore fall to 15 per cent."
- FT adds: "The bloc will continue to prepare a possible €93bn package of retaliatory tariffs, set at up to 30 per cent, in case they cannot agree a deal by August 1, the people said. A US official said the situation was fluid and subject to change."
- Bloomberg reported earlier that, absent a trade deal by August 1, the EU would "quickly hit the US with 30% tariffs on some €100 billion ($117 billion) worth of goods." The first wave of countermeasures would combine "an already approved list of tariffs on €21 billion of US goods and a previously proposed list on an additional €72 billion of American products into one package".
- Trump said on Truth Social earlier: "I WILL ONLY LOWER TARIFFS IF A COUNTRY AGREES TO OPEN ITS MARKET. IF NOT, MUCH HIGHER TARIFFS!"
