US DOLLAR
The US dollar index is mixed this morning amidst escalating trade tensions, brewing political uncertainties in Italy and a Brexit poised for final-days drama. The antipodean currencies are trading lower vis a vis the greenback whilst the Japanese yen is oscillating within recent ranges, supported by safe-haven flows. We expect risk-off sentiment to likely to persist over the coming days/sessions. Market will gradually shift its attention to Jackson Hole, Wyo., where central bankers gather for their annual conference. Besides a cuppa of iced-cider and roasted sweet corn, the hot topics are likely to range from international trade, low growth, anaemic inflation and to the need to be creative with limited monetary tools.
CANADIAN DOLLAR
USD/CAD continues to trade flat, touching distance of 1.33 handle. Canadian inflation rose above market estimates and may keep the BoC from buying an insurance rate cut at its next meeting. However, growing household debt and ongoing global trade tensions are expected to keep the CAD on the defensive.
EURO
The move from the 1.12 levels to the lows of 1.11 was rather swift for the EUR/USD. The pair is now trading just under the 1.11 handle following the release of subdued PMI readings. Manufacturing sector continues to suffer and confidence among firms are low resulting in lower job creation. German economy also sent out signals of distress with growth of service sector dented by falls in goods productions.
BRITISH POUND
The Sterling is enjoying rare gains with market hoping PM Johnson’s trip will result in an outcome other than no-deal Brexit. The officials have a 30-day window to concoct an alternative to avoid an Irish backstop. With no local data for release today, we expect the GBP to trade with measured optimism.
JAPANESE YEN
The Japanese economy is not immune to ongoing trade tiff between the two largest trading partners. Its all-industries activity index missed estimations, falling 0.8% in June. Whilst the FOMC meeting minutes provided no new clues, the policymakers do not see their last decision as a pre-set course of action. Risk-off sentiment is expected to support traditional safe-haven currencies.
