Archives of “currency” tag

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Trump directly threatens lira if Turkey launches ‘unnecessary’ attacks

  
Analysis, Forex
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Lira fell 2% yesterday

Trump is responding to criticism about abandoning the Kurds in Northern Syria as Turkey launches attacks near the border.
We may be in the process of leaving Syria, but in no way have we Abandoned the Kurds, who are special people and wonderful fighters. Likewise our relationship with Turkey, a NATO and Trading partner, has been very good. Turkey already has a large Kurdish population and fully understands that while we only had 50 soldiers remaining in that section of Syria, and they have been removed, any unforced or unnecessary fighting by Turkey will be devastating to their economy and to their very fragile currency. We are helping the Kurds financially/weapons!

Erdogan will visit the White House on November 13.

What lies ahead for the USD?

  
Analysis, Forex
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What is the outlook for the US dollar

What is the outlook for the US dollarThe USD has been steady versus a basket of major currencies since the start of 2019. The dollar index is trading close to September highs, which, in turn, are at the maximum levels since 2017.

The current week, however, hasn’t been very positive for the American currency. So, what future awaits it? In this article, you will find the fundamental outlook for the greenback.

US economy has faltered

Life shows that it’s not possible to fight in trade wars and stay unharmed. The data released on Tuesday showed that the US manufacturing sector is in its worst condition in a decade: ISM Manufacturing PMI dropped from 49.1 to 47.8 in September.

A reading below 50 indicates industry contraction. Given how low the latest number is, it’s certain that even if the underlying picture changes and positive factors come into play, the situation won’t be able to improve fast.

And so far, there are few reasons to believe that the United States and China will achieve a big breakthrough in their negotiations. Representatives of the nations will meet next week on October 10 and 11.

Although soothing comments may cheer the stock market, it will take the mutual renunciation of tariffs to amend the damage done to the economy. If talks fail, there will be more tariff hikes in the following months and hence an even stronger economic pain.

Moreover, recent rumors indicate that Donald Trump is considering limiting American investment flows to China. This step, if taken, would further escalate the trade conflict.

Remember that everything is interdependent in the economic world. Considering the external troubles, it’s now up to US consumers to drive economic growth. For them to be able to do that, they need ample wages.

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Crucial Update :US Dollar Index ,EURO ,YEN ,GBP ,INR ,CAD ,AUD ,PESO ,WTI ,SPX 500 -Anirudh Sethi

  
Analysis, Crude, Forex
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The Japanese yen and Canadian dollar were the only major currencies to gain against the US dollar last week.  They are also the only major currencies to appreciate against the dollar so far this year.  US President Trump’s apparent playing down of the pressure to strike a partial deal with China before the 2020 election weighed on stocks and lifted the so-called safe-haven currencies ahead of the weekend.  When everything was said and done, from the attack on Saudi Arabia to the money market squeeze in the US and the Fed’s rate cut, the dollar remained mostly within well-worn ranges.
The exceptions were idiosyncratic.  Growth concerns, both globally and domestically, saw the New Zealand dollar fall to new four-year lows ahead of the weekend.  The RBNZ meets next week, and the market has about six basis points of easing, or about a 25% chance of a cut.  The Australian dollar fell in four of last week’s five sessions and the day rose was by 1/100 of a penny, according to Bloomberg.  Sterling had threatened to break high in the second half of the week, but Ireland’s Deputy Prime Minister helped put Juncker’s seeming optimism in context.  UK Prime Minister Johnson reportedly acknowledged that the EU is unlikely to agree entirely with his proposal at the critical summit in the middle of next month.  These developments pushed sterling a cent off the highest level since July (~$1.2580).
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Brexit becomes a Dog’s Breakfast as Dollar’s Correction Continues

  
  Analysis
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The Dollar Index fell the most in three months yesterday and is experiencing mild follow-through selling today.  With hopes that Hong Kong has turned a corner, news that in-person US-China talks will resume next month, and a no-deal Brexit is well on the way to being averted, investor risk appetites are robust today.  Global equities are higher as are benchmark yields, while gold is being pushed back below $1550.  Most Asia Pacific equities advanced, though India and Malaysia were exceptions and Hong Kong saw a bout of profit-taking after yesterday’s surge.  In Europe, the Dow Jones Stoxx 600 is advancing for the third consecutive session and the fifth in six sessions to trade at one-month highs.  The S&P 500 has been crisscrossed the 2820-2950 range several times in recent weeks and is poised to gap above the top today.  Interest rates are backing up, and the 10-year yields are 3-5 bp higher.  The dollar is edging lower against most major and emerging market currencies.  Among the majors, the yen and the Swiss franc are experiencing minor losses, while among the emerging markets, the Turkish lira is off about 0.25%.  The lira may snap a three-day, five percent advance as Prime Minister Erdogan weighs in again on the need for aggressive rate cuts to ambitious growth hopes.
Asia Pacific
 
The PBOC’s dollar reference rate has been extremely stable in around CNY7.0850, and it is the market that blinked first.  The dollar’s broad pullback yesterday saw the model projections eased below CNY7.0940.  The onshore and offshore yuan has also converged near 7.1460. Chinese officials have been slower to roll-out additional stimulus than many observers have expected.  We had thought there was a good chance of a cut in reserve requirements over the summer.  Nevertheless, the State Council appears to be hinting of action soon, and a window of opportunity is seen before the October 1 national holiday.
With the latest round of tariffs and counter-tariffs in the US-China spat going into effect on the start of the month, securing face-to-face meetings proved difficult.  This had contributed to the pessimism.  However, now Chinese officials will come to the US next month, according to reports.   Still, the prospects of a deal are remote.  Trust between the two at a low ebb after two tariff truces were ended by the announcement of new action on Twitter, and China shows reluctance to change fundamental behaviors.  Separately, the US trade figures show that China was the third-largest buyer of US crude oil in June and July (buying 5.7 mln barrels and 7.1 mln barrels respectively).  South Korea was the largest buyer, followed by Canada.  China puts a 5% levy on US crude as of September 1.
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A couple of Brexit scenarios to ponder (and what they mean for EUR/GBP)

  
Analysis, Forex
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An overnight bank note (Rabo) on Brexit and euro / sterling

(in brief, and note this prior to Wednesday’s UK voting)
If legislation to rule out a no deal Brexit is rushed through parliament, the pound can be expected to rise. If it were decided that the Brexit deadline were to be extended but that the legal default position of the UK remains that a no deal Brexit could still take place at a future date, GBP may also rise, but by a lesser amount – since kicking the can down the road is not a solution.
  • In this scenario we would expect EUR/GBP to be trading in the 0.90 area on a 1 to 3 month horizon.
If a no deal Brexit is ruled out will would expect EUR/GBP to clamber back towards the 0.86 area in 3 months. 
If fresh legislation is not passed and the UK remains on course for a no deal Brexit in October we would expect EUR/GBP to rise firstly back towards the recent high in the 0.9325 area. 
How high EUR/GBP can go may then depend on whether the EU summit in mid-October brings any compromises.” “On a no deal Brexit on October 31, we expect EUR/GBP to rise towards parity.

August forex seasonal scorecard

  
Analysis, Forex
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You can’t predict anything from Donald Trump but the August seasonal patterns did a great job of predicting how the month would go.
1. Weakest month of the year for NZD/USD
This one delivered in a big way. Month-to-date the kiwi is down 3.7%. It’s fallen every which way and is the worst performing major currency this month.
2. 2nd weakest month for CAD
The loonie has been bolstered by some upbeat economic data including today’s GDP report but even with all that, the Canadian dollar fell 0.7% on the month against the US dollar.
3. 2nd weakest month of the year for AUD
It was the second-weakest month and AUD was the 2nd weakest performing major. AUD/USD fell 1.6% in the month.
4. 2nd weakest month for cable
This one bucked the trend but only modestly. Cable is up 0.4% on the month with more than half the gain coming today. Maybe it’s a good sign that the pound has been able to buck seasonal weakness?
5. 2nd strongest month for gold
Few traders need a recap on this one. Gold was a rocket ship in August posting one of its best months in years as it gained nearly 7%.
6. Poorest month over the past decade for the S&P 500
Stock markets have shown some impressive resilience over the tail end of this week but all that has done is narrowed a loss that was as much as 6.2% at one point down to -2.7%.
Verdict:
That’s a solid 5 out of 6 wins with a few homeruns in there. Ready for the September seasonal playbook?

Beijing pushes envelope with 7-yuan-to-dollar reference rate

  
  Analysis
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 China’s central bank set its daily yuan reference rate at 7.0039 to the dollar Thursday, crossing the 7 line for the first time in roughly 11 years and signaling resolve even as the U.S. cries foul over the weakening currency.

Market participants speculate that Beijing may keep pushing the rate to around 7.2 to 7.3 so as to alleviate the impact of the next round of American tariffs.

But while a weaker yuan will help exporters impacted by the drawn-out trade war, the People’s Bank of China still must carefully balance these gains against the risks of runaway devaluation and capital flight.

The yuan can move only 2% in either direction from the daily reference rate on the mainland. So the rate, announced before trading starts each session, reflects the monetary authorities’ wishes.

The authorities want a gradual weakening of the yuan, said Ken Cheung, senior Asian foreign exchange strategist at Mizuho Bank.

The Trump administration just labeled China a currency manipulator Monday, after the yuan weakened past the psychological threshold of 7 in Shanghai. Setting reference rates past that line could trigger further pushback from the U.S. (more…)

Wall Street drops on earnings as euro swings on ECB rhetoric

  
Analysis, US Market
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The S&P 500 retreated from a record high on Thursday as adverse reactions to a handful of corporate results weighed on the market and as the latest assessment of monetary policy rhetoric from the European Central Bank triggered a volatile session for the euro.

The US equities benchmark was down 0.5 per cent owing to poorly-received results from a number of technology and industrial companies.

American Airlines shed 8.4 per cent after saying it expected a larger hit to pre-tax earningsfrom the grounding of Boeing’s 737 Max jets. Southwest Airlines said it expected cost pressures from the grounding to weigh on results in the second half and decided it would cease operations out of Newark Liberty International airport, which helps serve the New York City area, although its shares managed to reverse early declines to finish roughly flat.

Rivals Delta Air Lines and United Airlines were both lower. Boeing remained under pressure, down nearly 4 per cent, after flagging on Wednesday it might have to cease production of the jet that was involved in two fatal crashes earlier this year.

Facebook and Tesla were down 2 per cent and nearly 14 per cent, respectively, after reporting results following Wednesday’s closing bell.

The leg down in US equities also came as investors digested better than expected US economic data that raised concerns that Federal Reserve policymakers may not be as dovish as markets expect at next week’s investor meeting.

There was much interest in the ECB, though. As President Mario Draghi gave his regular press conference after leaving interest rates on hold, investors measured his words against hopes for a return to economic stimulus in the region, which had pointed to more bond-buying as soon as September.

It sent the euro on a volatile run, and a rally for the region’s government bonds also faded, drawing yields higher as the trading day developed. Stocks also dropped back from highs, although banking shares remained in demand.

The shared currency bounced up off two-year lows after Mr Draghi spoke to reporters, and was about flat at $1.1144.

European stocks were also unsettled, with the extent of the ECB’s concern at an economic slowdown outweighing the hopes for fresh stimulus. Frankfurt’s Xetra Dax stood out, falling back by 1.3 per cent, surrendering earlier gains that took it up as much as 0.6 per cent for the session.

Deutsche Bank have raised their probability for a ‘no-deal’ Brexit to near 50%

  
Analysis, Forex
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The bank says sterling is not cheap and that GBP can go much lower

DB have raised the probability for a ‘no-deal’ Brexit to 45%.
The bank acknowledges that on long term valuation models (citing PPP and FEER models) GBP is close to fair value, but say political risk is skedded asymmetrically downwards. Short GBP/JPY “remains an excellent expression ” (adding that yen is ranking far cheaper across our suite of trade-based models )
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Weekly chart below:
The bank says sterling is not cheap and that GBP can go much lower

AUD/USD falls to two-week low amid poor data and firmer US dollar

  
Analysis, Forex
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AUD/USD falls to its lowest level since 24 June

AUD/USD H1 09-07
The pair is hitting a fresh low of 0.6936 on the day now as the aussie is dragged lower by poor business confidence data earlier and some notable strength in the greenback in the past hour of trading during the European morning.
That’s the lowest level the pair has traded since 24 June as sellers continue to stay in near-term control and are looking for a move towards 0.6900 ahead of Fed chair Powell’s testimony tomorrow and on Thursday.
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