U.S. dollar highlights:
USD firm after president Trump softened his tone against China and said they will be able to reach a trade deal soon. Last week trade tensions escalated, and the two countries retaliated with tariffs, however, this week both sides have agreed to negotiate and ease market concerns about global growth. USD buyers took advantage as crude oil prices keep rising but fears of a recession is limiting demand. President Trump also continued his criticism of the Federal Reserve, saying they “love watching manufacturers struggle with their exports”. Trump feels the Fed is keeping the USD too high for exporters and markets are concerned USD is under pressure to drop (to gain a competitive advantage in the trade war). Meanwhile, China did not confirm any trade talks occurred at the G7 summit. All eyes on GDP Growth Rate for Q2 available today.
Canadian dollar highlights:
CAD weaker after U.S. crude oil stocks dropped by 10.027 million barrels last week (following a 2.7 million decrease previously). Markets were only expecting -2.11 million barrels to decline as global demand continues to be affected by the trade war. All eyes on June GDP available tomorrow.
EUR lower as markets prepare for the European Central Bank to announce another round of monetary stimulus next month. Traded tensions and Brexit uncertainty causing risk aversion and EUR defensive. Germany’s GFK Consumer Confidence survey was steady at 9.7 reading (versus -9.6 expected); however, imports declined 2.1% (more than expected) in July. Meanwhile, Italian 10-year bond yields dropped to a record low (due to political optimism). Italy’s 5-Star Movement and democratic Party settled their differences and agreed on a deal to allow Giuseppe Conte to remain Prime Minister. All eyes on Consumer Prices for August and July’s Unemployment Rate (both available tomorrow).
British pound highlights:
GBP tumbles after Prime Minister Boris Johnson moved to suspend parliament. After opposition parties agreed to pass laws that would prevent a hard Brexit (instead of a No Confidence vote), Johnson is serious about leaving without a deal. The government will ask the Queen to prorogue parliament from September 9 to October 14, 2019. Parliament members may go to the courts or try to topple Johnson; however, the PM may also call an election for November to force a hard exit from the European Union.