US DOLLAR
Chinese authorities have signalled that they intend to apply retaliatory measures to nullify recent US trade tariffs. This may mean digging the toolkit to remote control a measured devaluation of the Yuan. It also means that there will be an intensification of global trade tensions. Market is hoping “constructive” talks between the two parties due in September yield more amicable results. In the meantime, an inversion of US Treasury curve, normally associated to global economic recession, sent stock market indexes into a panic sell mode. Currency market sees a shift in preference for traditional safe-havens.
CANADIAN DOLLAR
USD/CAD is trading within touching distance of 1.33 as USD bulls are hesitant to venture further north over global trade concerns. US retail sales, Philly Fed Manufacturing came above market estimates this morning. Yet, the US Dollar Index hardly budged. Global market sentiment is still cautious over an escalation of tension between China and the US. With crude oil prices remaining very choppy we expect the pair to remain volatile.
EURO
EUR/USD finally cracked below the 1.12 handle and remains near this week’s low. A series of lacklustre economic data finally caught up with the currency in a thin market. However, fear of a global economic meltdown and ongoing tussle between the US and China are likely to keep investors cautious.
BRITISH POUND
After a surprising uptick in inflation, UK registered another unexpected increase in retail sales. In the three months to July, retail sales rose by 0.5%. The pound got a temporary boost moving above the 1.21 handle. There are however no great expectations for a higher high from here as the main drivers – regional growth, Brexit and interest rate outlook are still at play.
JAPANESE YEN
Trade tension climbed another level after Chinese officials telegraphed their intentions to counter recent US trade measures. USD/JPY retreated from the session high and is now looking for clear trading impetus. The mood is back to risk- off and we expect the pair to trade inside the weekly range with a bias to the downside.
