There is a strange lack of urgency or firm directional bias in the market as participants prefer to err on the side of cautious ahead of key event risks: the ECB and US Federal Reserve meetings. There is also little information and fresh development around US-China trade talks though there are signs of a thaw in the frosty relationship.
The US economic docket will relatively light today with the release of Producer Price Index (PPI) which may drive the US dollar in short-term. Gold prices remain a touch within the key $1500 amidst fading appetite for risky assets. The Canadian loonie, a star performer, is keeping steady against the greenback and has strengthened nearly 4% year to date.
Recent economic data has revealed a certain degree of resilience underlying the Canadian economy despite global trade disputes. Yet, it does not imply that the country is totally immune to the ripple effects of anti-trade measures. The loonie keeps a bid tone against the greenback, fetching 76 cents US, a two-month high. USD/CAD is expected to consolidate within narrow ranges with a bias to further downside.
The euro is trading near the lower end of the 1.1000-1.1060 range with the main focus on tomorrow’s ECB meeting. Recent weakening in economic data points clearly indicates that the Eurozone needs a monetary policy reset. Yet, with the next action already priced in, cautiousness is starting to creep into the market: disappointment that stimulus will fall short or not good enough could weigh on the EUR/USD.
GBP/USD continues to enjoy a rare sense of calmness in the market, oscillating around the mid-point of .12300s. Currency market participants seem to have moved into a wait and see mode after the UK Parliament adopted a law to avoid a no-deal Brexit and voted against a fresh election.
With the House now suspended for the next five weeks, the Pound waits for new announcements Brexit developments. PM Johnson could be the last action hero if he convinces the EU to adopt an alternative plan with no backstop.
The Aussie is hanging tough against the greenback and sits around the 0.6800s, as investors are very optimistic that trade talks will resume between the US of A and China.
The greenback continues to climb against the Japanese Yen, touching its highest level since last July 31st. Positive mood prevailing in the market, a seemingly improving US-China relationship and better performance in US Treasury yields are the key drivers behind recent moves. The market expects a lower reading of Japanese core machinery orders and soft inflation to weigh further on the Yen.
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