US DOLLAR

The US dollar is building on yesterday’s rebound, buoyed by positive comments from members of the Fed and the US Treasury Secretary. The latter signalled that the US and China are 10% away from clinching a trade deal. The most dovish of the Fed members, Bullard, believed a 50 basis point rate cut is off the charts as the economy needs only minor “insurance cut”. Market seems to largely ignore today’s announcement: new orders for manufactured durable goods fell 1.3% in May. The focus will be heavily on upcoming G20 meeting and the prospects of a trade agreement between the two largest trading partners.

CANADIAN DOLLAR

USD/CAD consolidates around the four-month low with the greenback attracting bids on the back of a slight change on sentiment. The US Fed will be data dependent and is not expected to rush in chopping down interest rates. Market is also starting to price in a de-escalation in trade tension between the US and China. The loonie comes under pressure after Chinese authorities imposed a “temporary” ban on meat imports. The pair is expected to remain within recent ranges ahead of the release of Canadian GDP figures.

EURO

EUR/USD continues to slide lower as the greenback makes a timid comeback on month-end portfolio rebalancing flows. The Gfk Consumer Climate Study is predicting a slight drop to 9.8 points for next month, down from a June figure of 10.1 points. Consumer is expected to buy more despite fears of job losses in the short term. The economic mood is meanwhile stabilising despite uncertainty over Brexit. As we noted last time, the pair needs a major positive switch in economic fundamentals to push above the 1.14 handle.

BRITISH POUND

The Pound is trading 0.15% lower this morning in reaction to growing fears of a no-deal Brexit. Boris Johnson re-affirmed his commitment to get the UK out of the EU by October 31st with a “do or die” pledge. We expect a final tussle between the two parties and further downside for the Sterling over the coming months.

JAPANESE YEN

The greenback is displaying its best performance in four sessions, trading 0.4% higher this morning. The Fed continues to send signals that they are in no rush to loosen the rates. New positive development between the US and China is also encouraging risk-on trades and weighing on safe-haven currencies. The economic calendar remains light today and we expect the pair to trade with a positive bias with 108 on sight.