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Brexit talks look set to hit another roadblock, this time over truck access to the EU

  
  Analysis
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The Financial Times report that Brexit trade talks set to stall again over British truckers’ EU access

  • Brussels warns that UK demands on haulage are too close to single-market rights

Brussels has rejected the UK’s opening demands for continued wide-ranging access to the EU for British truckers
This is just one of the points upon which negotiations will stall. Fishing rights, state subsidies are others. Talks are this week between the two sides.
The Financial Times report that Brexit trade talks set to stall again over British truckers' EU accessBrussels warns that UK demands on haulage are too close to single-market rights

Dollar reverses its course

  
  Analysis
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Seeing some dollar buying all of the sudden

The dollar has reversed back higher in the last 30 minutes of trading.
Seeing some dollar buying all of the sudden
The EURUSD is back down testing the trend line on the 5 minute chart. The 100 bar MA on the same chart has been broken, but the trend line continues to hold the support.
GBPUSD
The GBPUSD has moved down to test its 100 bar MA on the 5 minute at 1.30904 but is finding some support as well. It will take a move below to swing more of the bias back to the downside.

Trade the strong against the weak

  
Analysis, Forex
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NZD

One of the key trading maxims in the FX world is pairing strength against weakness.If you need a refresher on that concept please do check that out here. So, yesterday we had the RBNZ rate meeting which has given us a weak NZD bias. Going into the event a client was asking me what I was going to do before the RBNZ rate meeting. The answer was simple, wait. Waiting to for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.

Reasons for the RBNZ’s weakness

The RBNZ has launched a set of bearish policies extending its asset purchases programme and showing openness to negative interest rates. They increased their quantitative easing (LSAP) programme to $100bn and extended its length from 12 to 22 months. Furthermore, the RBNZ expressed a preference for a lower or negative OCR and a ‘Funding for Lending Programme’, while leaving all options on the table.

So, we now have a short to medium term NZD bearish bias, look to pair it with currencies as they show strength. Yesterday’s strong AUD employment data make AUDNZD longs appealing on pull backs.

NZD

China’s Global Times says the US is becoming the biggest uncertainty in future global economic growth

  
  Analysis
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An opinion piece in the state-owned tabloid

Some of the remarks in the piece:
  • The US has rolled out a series of policies to monetize financial deficit …  which has aggravated financial risks in the country, and cast a shadow over further investments.
  • US’ failure to handle the coronavirus may even prolong the pandemic
  • skyrocketing unemployment has resulted in sliding consumption which in turn is causing a decline in exports from its trade partners
  • huge debt and expanding stock market bubbles have damaged the confidence of global investors
GT is a barometer of official thinking in China re the US, relations between the two contries are on a downward path.
Global Times editor Hi Xijin:
An opinion piece in the state-owned tabloid

Amazon’s Bezos sold $1.9 billion of his shares …. yours!

  
  Analysis
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Reuters with the report on stock sales by Amazon head and founder Jeff Bezos.

  • During the first two working days of August, Bezos sold over 600,000 shares
  • part of a previously announced trading plan
Bezos now only has 54.9 million shares left (roughly $176 billion). I know you’ll join me in sending thoughts and prayers. 😀
Reuters with the report on stock sales by Amazon head and founder Jeff Bezos.

US dollar catches an early bid on Fed day

  
Analysis, Forex
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USD/JPY pops

Short-term speculators are no-doubt short the US dollar so some position squaring early today into the FOMC decision make sense. We’re also closing in on month-end so flow driven trades are going to be a factor.
The Fed decision is at 1800 GMT with Powell 30 minutes later. I’ll be looking for commentary on the economy as the top market mover. If it’s negative, the Fed will have to offer more strong hints at easing to keep the equity babies bulls at bay.
Other economic data today is a mish-mash of second tier data including:
  • US trade balance (advance goods)
  • Wholesale inventories
  • Pending home sales
  • Weekly oil inventories.

Goldman Sachs says real concerns about USD as reserve currency. Barclays says No.

  
Analysis, Forex
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GS is alarmed, says “Real concerns about the future of the US Dollar as the world’s reserve currency have started to emerge.”

Barclays says nope, the US “isn’t anywhere close to losing its reserve currency status”. Barclays cite:
  • “depth of capital markets and overwhelming volume of USD denominated global transactions” 

On the recent decline in the dollar:

  • “Reserve managers and investors have spent the better part of the last few years accumulating USD assets and with the recent developments, simply find it prudent to diversify into less USD denominated exposures” 

Barclays comments via Bloomberg.

I’m with Barclays on this one.
GS is alarmed, says "Real concerns about the future of the US Dollar as the world'sreserve currency have started to emerge."

Australia NAB Business Survey – ” largest shock since the 1930s”

  
  Analysis
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Main points from NAB’s assessment of the survey:

  • shows a significant deterioration in both current conditions as well as expected outcomes for activity, capex and employment going forward
  • Current conditions lowest read since the early 1990s
  • weakening was driven by sharp declines across all three sub-indexes and was broad-based across industries
  • decline in confidence was more muted, likely reflecting survey timing, with activity starting to recover with the removal of restrictions and easing in lockdowns
  • The impact of shutdowns is evident in the record decline in capacity utilisation which was also at its weakest level since the last recession. Unsurprisingly given the massive hit to conditions and capacity utilisation, expectations for capex and employment have declined very sharply at both the 3- and 12-month horizons
  • While we know that conditions and confidence saw a rebound late in the quarter, the level of activity remains weak and confidence may remain fragile. These factors pose a risk to a rebound in hiring and investment intentions going forward and warrant close watching. These risks also warrant ongoing government support for a period while the economy recovers from the largest shock since the 1930s.
Bolding mine.

Here’s a EUR/USD forecast (to 1.15) with the ECB expected to be optimistic this week

  
Analysis, Forex
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The European Central Bank meet this week, preview below.

  • Meeting Thursday 16 July 2020
  • Policy announcement at 1145GMT (policy likely unchanged)
Euro forecast via Danske (this from late last week):
  • We remain constructive and expect the broad USD to decline over the coming months
  • 3 month forecast is 1.15
On the upcoming ECB policy meeting
  • we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. 
  • We also expect they may decide not to use the EUR1,350bn PEPP envelope in full. 
  • No new initiatives are expected next week
  • Markets may not be prepared for a ‘less dovish’ message
  • with abundant liquidity, PEPP and APP still ongoing
  • Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads. 
For spot FX,
  • the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg

European Central Bank preview

OPEC and its partners will consider increasing oil output at a meeting this week

  
Analysis, Crude
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Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week’s meeting.

  • Key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies will hold a virtual meeting on Wednesday 15 July
There is no further detail on this, link here
The increased optimism comes as hopes are up that demand is beginning to recover and will continue to do so. Its not going to be smooth sailing though.
Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week's meeting.
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