US DOLLAR
The US Administration surprised the market after announcing new taxes on Chinese imports. This move comes at a time when officials from both sides were apparently applying finishing touches after completing 90% of a trade arrangement. The element of known unknown has again pushed the greenback lower in overnight session with traditional safe-haven currencies attracting flows. The Japanese Yen has strengthened nearly 2%, gold gained 3.5% whilst oil futures petered out 6.5% to a two-month low on concerns of global economic slowdown. Non-farm payroll came in line with market estimates, rising 164k in July and confirming the Fed outlook of a strong domestic economy but facing trade-related external uncertainties. We expect market to keep an eye on the Twittersphere for aftermath shocks and on US President’s speech on “Trade with EU” later this afternoon.
CANADIAN DOLLAR
The Canadian dollar declined to a two-month low versus the greenback and is tracking the poor performance in oil futures market. WTI oil plunged 6.5% after the US Administration indicated that it will apply a new 10% tariff on imports from China. The flare-up in trade tension is likely to affect business investment decisions, consumer spending and overall global growth. We expect USD/CAD to remain choppy around the mid-point of 1.3200.
EURO
The Euro trading higher as we enter the final session of the week. EUR/USD went through choppy moves and now see a rebound after the US Administration decided to slap another 10% tariffs on Chinese products. Better sales numbers coming out of the euro bloc supplied some support to the shared currency. Volume of retail trade recorded a monthly jump of 1.1% in June and was up 2.6% when compared to the same month of last year. We expect further upsides to be limited and the focus will be on President Trump’s speech on US-EU trade relationship.
BRITISH POUND
It came as no surprise to the market when the UK construction sector output fell again in July. It confirms a decline for the third month in a row with new orders drying up as a result of the ongoing political uncertainty. The PMI reading was at 45.3, below market consensus estimate and business confidence is now at its lowest level since November 2012. The Pound is holding onto tiny gains, but the near-term outlook remains bearish.
JAPANESE YEN
Market went into a panic mode, after US President indicated that the administration is ready to impose a 10% tariff on an additional $300 billion in Chinese products and it could very well get messier. USD/JPY fell overnight nearly 2% following the announcement. Renewed trade tensions and safe-haven flows are expected to keep the Yen strong.
