Dollar Falls, Markets Prepare for First Session of Jackson Hole Symposium Today
US stocks and the Dollar declined as President Trump stroked fresh concerns on domestic and trade policy. Trump threatened to shut down the government if he could not get funding for a wall with Mexico. He also warned that he would scrap the NAFTA trade agreement with Canada and Mexico. Fitch Rating Agency cautioned a rating review if the US debt ceiling is not raised. The Euro rallied supported by strong German and Euro Zone PMI data. Sterling’s slide extended on fresh Brexit worries.
German Flash Manufacturing PMI rose to 59.4 against a forecast 57.7 and previous 58.1
Euro Zone Flash Manufacturing PMI rose to 57.4 against a forecast 56.3 and previous 56.6
French Flash Manufacturing PMI rose to 55.8 from a previous 54.9 and a forecast 54.5
Euro Zone Services PMI fell to 54.9 from a previous 55.4 and a forecast of 55.4
US Flash Manufacturing PMI fell to 52.5 against a forecast 53.4 and previous 53.3
US Flash Services PMI rose to 56.9 against a forecast 55.0 and previous 54.7, which was revised up
US New Home Sales declined to 571,000 units against a forecast 611,000 units
Wall Street led global stocks lower. declined. The US Dow declined 0.4 %. Germany’s DAX Index fell 0.4%
The US Ten Year Treasury yield dropped 4 basis points to 2.17%, the lowest since late June. The yield on the German Ten Year Bund fell 2 basis points to 0.37%.
USD/DXY – retreats to close 0.29% lower at 93.217 (93.494 yesterday)
EUR/USD – finishes 0.38% up at 1.1810 from 1.1762 yesterday
USD/JPY – drops back to end at 109.02 from 109.58 yesterday. Market’s risk tone deteriorates
GBP/USD – slips to close down at 1.2800 from 1.2822 yesterday.
EUR/GBP – up, finishes at 0.9227 (0.9175 yesterday), fresh 10 month highs
AUD/USD – closes little-changed at 0.7905 from 0.7912 yesterday.
Outlook: Donald Trump was at it again, giving one of his now familiar “stroking” speeches. While markets were alerted, the fall-out was contained. At the end of the day, it’s the US Congress that will decide any shut down or debt ceiling. However, Turmp does have political sway over trade policy. The Dollar Index’s fall (0.30%) was mainly due to the rise in the Euro. Other currencies were little-changed with the Australian Dollar neutral. The resumption of Brexit negotiations begin soon and this weighed on Sterling.
Event and economic data releases today:
Swiss Q2 Industrial Production (GMT 7.15 am, Aug 24/Local Time 5.15 pm, Aug 24): previous quarterly print was -1.6% while the annual previous print was -4.6%
UK Q2 GDP (GMT 8.30 am, Aug 24/Local Time 6.30 pm, Aug 24) – Quarterly forecast is at 0.3% against the previous 0.3%, Annual forecast is at 1.7% from the previous 1.7%
US Weekly Jobless Claims (GMT 12.30 pm, Aug 24/Local Time 10.30 pm, Aug 24) forecast: 238,000 from previous 232,000
Jackson Hole Symposium Day 1 (GMT Aug 24/ Local Time Aug 25 – whole day)
Trading View: The market’s risk appetite has deteriorated which should continue to favor the Yen and Swiss Franc. The Euro and Aussie should trade within the ranges established this week. Sterling’s soft tone looks set to continue. Traders now await the Jackson Hole symposium with particular attention on speeches by Janet Yellen and Mario Draghi.
EUR/USD – rallied back on the stronger German and Euro Zone PMI readings. The Euro closed on a firm note at 1.1810. Overnight high traded was at 1.1823. The range this week has been 1.1730-1.1830 and this should continue to hold. Speculative Euro longs remain at extremes which will limit the Euro’s topside. And while Trump’s political woes continue to build, a report saw French President Macron’s approval rating down to 36%. The US Ten Year bond yield fell by 4 basis points. Germany’s Ten year Bund yield was 3 basis points lower. EUR/USD has immediate resistance at 1.1830. Support is found at 1.1780. Likely range today 1.1780-1.1840. Look to sell rallies.
USD/JPY – closed down at 109.02 on a generally weaker US Dollar and a rise in risk aversion. The Yen will continue to strengthen if the market’s risk tone deteriorates. USD/JPY has good support at 108.80 and 108.60. Immediate resistance is found at 109.30 and then at 109.60. Likely range 108.80-109.30
GBP/USD – slip-sliding away, closed lower at 1.2800 after trading to an overnight low of 1.2780. Sterling has support at that 1.2780 level. The next support level is found at 1.2740. Immediate resistance for the Pound is found at 1.2840. Likely range today 1.2770-1.2830.
AUD/USD – finished little-changed to close at 0.7905 from 0.7912 yesterday. The Aussie’s tone has been pretty neutral this week with no fresh factors out of Australia. AUD/USD has immediate resistance at 0.7920. Strong resistance lies at 0.7550 and that should hold today. Immediate support can be found at 0.7880. Likely range today 0.7890-0.7940. Look to sell rallies. The speculative market is still long of Australian Dollars.
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