Time | Country | Event | Period | Previous value | Forecast |
---|---|---|---|---|---|
01:30 | Australia | Home Loans | June | 0.0% | 0.6% |
02:00 | New Zealand | RBNZ Interest Rate Decision | 1.5% | 1.25% | |
02:00 | New Zealand | RBNZ Rate Statement | |||
03:00 | New Zealand | RBNZ Press Conference | |||
06:00 | Germany | Industrial Production s.a. (MoM) | June | 0.3% | -0.4% |
06:45 | France | Trade Balance, bln | June | -3.3 | -4 |
07:00 | Switzerland | Foreign Currency Reserves | July | 759 | |
07:30 | United Kingdom | Halifax house price index | July | -0.3% | 0.3% |
07:30 | United Kingdom | Halifax house price index 3m Y/Y | July | 5.7% | 4.4% |
13:30 | U.S. | FOMC Member Charles Evans Speaks | |||
14:00 | Canada | Ivey Purchasing Managers Index | July | 52.4 | 53.0 |
14:30 | U.S. | Crude Oil Inventories | August | -8.496 | -3.313 |
19:00 | U.S. | Consumer Credit | June | 17.09 | 16 |
23:50 | Japan | Current Account, bln | June | 1594.8 | 1140 |
Time | Country | Event | Period | Previous value | Forecast |
---|---|---|---|---|---|
01:30 | Australia | Home Loans | June | 0.0% | 0.6% |
02:00 | New Zealand | RBNZ Interest Rate Decision | 1.5% | 1.25% | |
02:00 | New Zealand | RBNZ Rate Statement | |||
03:00 | New Zealand | RBNZ Press Conference | |||
06:00 | Germany | Industrial Production s.a. (MoM) | June | 0.3% | -0.4% |
06:45 | France | Trade Balance, bln | June | -3.3 | -4 |
07:00 | Switzerland | Foreign Currency Reserves | July | 759 | |
07:30 | United Kingdom | Halifax house price index | July | -0.3% | 0.3% |
07:30 | United Kingdom | Halifax house price index 3m Y/Y | July | 5.7% | 4.4% |
13:30 | U.S. | FOMC Member Charles Evans Speaks | |||
14:00 | Canada | Ivey Purchasing Managers Index | July | 52.4 | 53.0 |
14:30 | U.S. | Crude Oil Inventories | August | -8.496 | -3.313 |
19:00 | U.S. | Consumer Credit | June | 17.09 | 16 |
23:50 | Japan | Current Account, bln | June | 1594.8 | 1140 |
Jane Foley, the senior FX strategist at Rabobank, notes that with the escalation in the trade war between the U.S. and China in the past few days, the question is whether recent events will trigger a full-blown currency war and how far the crossfire will extend.
The Job
Openings and Labor Turnover Survey (JOLTS) published by the Labor Department on
Tuesday showed a slight drop (-0.5 percent m-o-m) in the U.S. job openings in
June.
According to
the report, employers posted 7.348 million job openings in June, compared to
the May’s figure of 7.384 million (revised from 7.323 million in original
estimate) and economists’ expectations of 7.317 million. The job openings rate
was 4.6 percent in June, down from a revised 4.7 percent in the prior month. The
report showed that the number of job openings was little changed for total
private and for government. The job openings level rose in real estate and
rental and leasing (+38,000 jobs in June) as well as state and local government
education (+20,000).
Meanwhile, the
number of hires declined to 5.702 million in June from 5.760 in May. The hiring
rate was 3.8 percent, unchanged from May. The number of hires was little
changed for total private and for government. Hires rose in accommodation and food services (+76,000).
The separation
rate in June was at 5.481 million or 3.6 percent, compared to 5.557 million or
3.7 percent in May. Within separations, the quits rate was 2.3 percent (flat
m-o-m), and the layoffs rate was 1.1 percent (-0.1 pp m-o-m).
Ned Rumpeltin, the European head of FX strategy at TD Securities, points out that in a surprise move, the US Treasury has designated China as a currency manipulator.
Frances Cheung, an analyst at Westpac, notes that the PBoC is sending signals that it would like to mitigate RMB depreciation pressure by fixing USD/CNY somewhat low, and by announcing that it would issue offshore PBoC bills again.
ANZ's analysts note that Australia’s monthly trade balance climbed to a new high in June, coming in at an AUD 8,036m surplus, the highest on record by some margin.
Sean Callow, an analyst at Westpac, thinks that the U.S. Treasury’s announcement of China to be a currency manipulator is likely to make little difference, given how far the U.S.-China trade tensions have already escalated.
TD Securities' analysts note that German factory orders surged by 2.5% m/m in June, led by a surprising 5.0% m/m jump in foreign orders.
FX Strategists at UOB Group noted the greenback remains in a negative phase while USD/JPY could still slip back to the mid-105.00s and 104.96.
24-hour view: “As expected, USD maintained its ‘downside bias’ and traded one yen lower from yesterday’s reference. That said, signs are showing that downside momentum is abating. As such, further declines are unlikely to sustain below 105.10 at least for today. Resistances are expected at 106.25 and 106.50”.
Next 1-3 weeks: ““In our previous report (2-Aug, spot 107.45), we cited a further risk of markets ‘repositioning for a lower USD/JPY going forward’ and that a NY close below 107.00 would warrant a ‘negative phase’ for USD (closing price on Fri: 106.58). Here, price action is likely to stay volatile and should USD drops below 106.00, key support at 105.50 and Jan’s flash crash low of 104.96 would quickly come into focus. On the upside, resistance is expected at 107.10 and only a recovery above 107.90 would indicate that downside pressures on the USD have eased“.
Global growth headwinds justified last week's rate cut
Trade uncertainty has amplified, could chill business investment
Doesn't see the economy heading into a recession
Continued headwinds from trade, lower policy rates from other central banks could justify lower rates
A freer-floating yuan could be a positive for China’s sovereign credit rating, agency Fitch said, by helping preserve its foreign exchange reserves and cushioning some of the negative effects of U.S. trade tariffs.
Andrew Fennell, a director in Fitch's sovereign ratings arm, said Monday's fall in the yuan past the seven-per-dollar level was "not meaningful from a sovereign credit perspective."
"In fact, to the extent that moves are orderly and do not destabilize currency expectations or precipitate capital outflows, greater currency flexibility could even be viewed as positive from a credit perspective."
The Chinese authorities have been seeking to introduce greater currency flexibility for some time, he added, while the Chinese currency has tended to weaken during periods of trade war escalation and strengthen during cooling-off periods.
Fitch rates China at A+ with a 'stable' outlook, in line with both S&P Global and Moody's.
Analysts at TD Securities expect that in the RBNZ's Monetary Policy Statement, downgrades to the Bank's GDP and potentially CPI forecasts are likely to pave the way for the RBNZ to cut the cash rate to a record low 1.25%.
“This is in line with 18/21 analysts in Bloomberg, with 3 forecasters looking for rates to remain unchanged. The deteriorating trade outlook means the Bank is unlikely to shut the door on further easing, instead offering a contingent easing bias.”
China firmly opposes a U.S. decision to label it a currency manipulator, its central bank said on Tuesday, adding that Beijing has not used and will not use the yuan to cope with trade frictions with the world’s biggest economy.
Designating China as a currency manipulator seriously harms international rules, the People’s Bank of China (PBOC) said in a statement.
The U.S. labeling China a currency manipulator is nothing but an “empty threat,” said Stephen Roach, a senior fellow at Yale University.
The formal designation came a day after China allowed its currency to breach a psychologically important level, with the yuan falling to 7 against the dollar on Monday — the first time since 2008 that’s happened.
“I don’t think Beijing is going to really respond to this name-and-shame approach by the Trump administration ... I think this in and of itself is an empty threat, ” Roach told.
“But if the U.S. does escalate further on the tariff front, or try other sanctions, then as we saw overnight, there will once again be intensification of pressure coming back from the Chinese. They have plenty of options to consider as the recent move in the bilateral exchange rate demonstrates,” Roach said.
Goldman Sachs said it no longer expects the United States and China to agree on a deal to end their prolonged trade dispute before the November 2020 presidential election as policymakers from the world's largest economies are "taking a harder line".
The bank now expects two back-to-back rate cuts from the U.S. Federal Reserve (Fed) "in light of growing trade policy risks, market expectations for much deeper rate cuts, and an increase in global risk related to the possibility of a no-deal Brexit".
The comment came after U.S. President Donald Trump said last week he would impose a 10% tariff on $300 billion of Chinese imports from Sept. 1,
The move by Washington "suggests that both sides in the trade conflict are taking a harder line, reducing the odds of a resolution in the near term," Goldman Sachs chief economist Jan Hatzius wrote in a note. Hatzius said expects the new set of tariffs to remain in place on election day in November.
Hatzius sees a 75% chance of a rate cut by the Fed in September and a 50% chance in October, following the reduction last week. He had previously only expected two cuts this year.
According to Danske Bank analysts, the recent escalation in the trade war pushed USD/CNY above the psychological level of 7.0 on Monday and market participants are increasingly discussing if China is using the currency in the trade war.
“Trump has little doubt about it when he tweets and overnight the US Treasury officially named China a currency manipulator. The move came outside the normal semi-annual updates. The labelling is primarily symbolic given the new tariffs already in place, but the move is certainly yet another escalation of the trade war and markets reacted negatively to the move. However, importantly, the People's Bank of China did not let the yuan weaken further overnight and USD/CNY stabilised slightly above 7 this morning. China has been selling yuan-denominated bills and the mid-point for onshore trading was set a stronger level than expected this morning. The stronger yuan level has helped stabilise US equity futures. Officially, the Chinese central bank says the weakening on Monday reflects market moves in light of the protectionist measures from the US. We argue that China will not pull the currency weapon as it could (1) backfire as capital outflow could accelerate, (2) China wants to be a reliable economic power in the global economy and (3) China will see a significant setback in its intention of moving towards a market-based currency. It does not mean that the CNY cannot weaken further, as we expect. In our view market flows point to a move towards 7.20 in 6M time.”
David Plank, head of Australian economics at ANZ, points out that the RBA kept the cash rate at 1% in August, but retained an explicit easing bias.
“The Board will continue to monitor developments in the labour market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time. We note that “adjust monetary policy” in the July statement has become “ease monetary policy” in August. While the change is not of great significance, it reinforces the fact there is only one direction for the cash rate at present. The growth forecasts for 2019 and 2020 are in line with what we expected from the RBA. In terms of inflation, we expect the RBA to round its published numbers to 2% for both 2020 and 2021, but 2¼% for 2021 is a possibility given the RBA’s description.”
The latest escalation in tensions between the U.S. and China has reduced the chances that both sides could reach a trade deal this year, a former American diplomat said.
Trump’s latest actions are “a step away from a solution,” said Frank Lavin, U.S. ambassador to Singapore from 2001 to 2005. He added that it’s “unlikely” both sides would reach a deal by the end of this year.
“This tariffs war has gone on for over a year, so you see a deterioration in environment, a deterioration in trust and communication,” Lavin, who’s now chief executive at business consultancy Export Now, told.
Despite Trump’s tariff threat, some analysts have predicted that the president still wants a deal with China — because that could help him win a second a term in the White House. Many analysts have said a large part of Trump’s re-election chances hinge on the strength of the U.S. economy.
Karen Jones, analyst at Commerzbank, EUR/USD saw only a brief slide below 1.1100 last week and has quickly recovered.
“It is contained longer term within a down channel the top of which lies at 1.1377 and is reinforced by the 55 week ma at 1.1360. Shorter term the market has recovered to overcome pivotal resistance at 1.1176/88 (mid-June low and March low) and we will assume a near term attempt on the highs from last week at 1.1285 and the 200 day ma at 1.1299 is likely. Dips lower are likely to find some support circa 1.1150.06. Key support is the 1.0967 2018-2019 support line and below here lies the 78.6% retracement at 1.0814/78.6% retracement. The market will need to regain the 55 week ma and channel at 1.1360/77 to generate upside interest.”
Michael Gordon, senior economist at Westpac, points out that New Zealand’s labour market has defied expectations of a slowdown, with the unemployment rate falling to an 11-year low of 3.9% in the June quarter.
“Employment growth was solid, with the surprise being the lack of an accompanying rise in labour force participation. Wage growth was boosted by this year’s large increase in the minimum wage, but underlying growth looks to have picked up a little as well. Today’s results won’t stand in the way of an OCR cut tomorrow, though they reduce the risk of a follow-up move in September.”
The U.S. Treasury Department designated China as currency manipulator, a historic move that no White House had exercised since the Clinton administration.
“Secretary Mnuchin, under the auspices of President Trump, has determined that China is a Currency Manipulator,” the Treasury Department said in a release. “As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions.”
The formal designation - the first since President Bill Clinton’s administration in 1994 - came after China on Monday allowed its currency to breach a psychological level.
“In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past,” the Treasury Department added. “The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade.”
According to the provisional data from Federal Statistical Office (Destatis), price-adjusted new orders in manufacturing had increased in June 2019 a seasonally and calendar adjusted 2.5% on the previous month. Economists had expected a 0.5% increase. For May 2019, revision of the preliminary outcome resulted in a decrease of 2.0% compared with April 2019 (provisional: -2.2%). Price-adjusted new orders without major orders in manufacturing had decreased in June 2019 a seasonally and calendar adjusted 0.4% on the previous month.
Domestic orders decreased by 1.0% and foreign orders increased by 5.0% in June 2019 on the previous month. New orders from the euro area were down 0.6%, new orders from other countries were up 8.6% compared to May 2019.
In June 2019 the manufacturers of intermediate goods saw new orders increase by 1.3% compared with May 2019. The manufacturers of capital goods showed increases of 3.7% on the previous month. For consumer goods, a decrease in new orders of 0.4% was recorded.
EUR/USD
Resistance levels (open interest**, contracts)
$1.1280 (1986)
$1.1258 (1920)
$1.1242 (710)
Price at time of writing this review: $1.1206
Support levels (open interest**, contracts):
$1.1181 (2450)
$1.1142 (3090)
$1.1097 (5063)
Comments:
- Overall open interest on the CALL options and PUT options with the expiration date August, 9 is 76697 contracts (according to data from August, 5) with the maximum number of contracts with strike price $1,1100 (5063);
GBP/USD
Resistance levels (open interest**, contracts)
$1.2354 (228)
$1.2308 (255)
$1.2266 (435)
Price at time of writing this review: $1.2163
Support levels (open interest**, contracts):
$1.2080 (560)
$1.2040 (290)
$1.1995 (354)
Comments:
- Overall open interest on the CALL options with the expiration date August, 9 is 17000 contracts, with the maximum number of contracts with strike price $1,3000 (2051);
- Overall open interest on the PUT options with the expiration date August, 9 is 20314 contracts, with the maximum number of contracts with strike price $1,2450 (2362);
- The ratio of PUT/CALL was 1.19 versus 1.23 from the previous trading day according to data from August, 5
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.67521 | -0.65 |
EURJPY | 118.445 | 0.06 |
EURUSD | 1.12127 | 0.96 |
GBPJPY | 128.256 | -1.02 |
GBPUSD | 1.21423 | -0.11 |
NZDUSD | 0.65107 | -0.33 |
USDCAD | 1.32047 | 0.03 |
USDCHF | 0.97165 | -1.08 |
USDJPY | 105.629 | -0.9 |
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