After a highly volatile week, the FX markets ended Friday on a mixed note – apart from Sterling which headed sharply lower, while stocks slipped slightly as the US/China trade dispute produced another day choppy price action.
Donald Trump was again at the centre of attention, adding to the “risk-off” tone by suggesting that trade negotiations would be cancelled next month, and this came after the earlier news the US would ban sales of chips from U.S. companies to Chinese telecom Huawei. Trump’s comments were later dialled back somewhat by the White House and helped provide some stability to the markets.
Sterling had a tough day after the release of the UK GDP data, where recession fears are growing as the economy shrinks on the back of the Brexit chaos. The UK economy contracted by 0.2% in Q2 and was the first fall in the GDP in six and a half years. This came on top of the added uncertainty of a possible snap General Election in the aftermath of the UK leaving the EU with no deal, and leaves Cable looking to be in real trouble with 80 days to go until 31 Oct. Elsewhere in the FX markets, the US$ ended mixed, slightly higher against the Aud$ and Nzd$, under pressure against the Jpy and the Chf and unchanged against the Euro. Trade negotiations are going to remain the main focus for traders this week, but also, note that the Euro could come under pressure on the back of increased political tensions, after Matteo Salvini, the leader of Italy’s League party called for a snap election, saying differences with the 5 -Star coalition partners cannot be mended.
Elsewhere, WTI headed strongly higher, +3.7%, as traders digested Saudi Arabia’s latest plan to help stabilize prices, with a plan to keep oil exports below 7 million bpd next month, releasing less crude to the market than the required demand. The metals were pretty much flat, while bond yields were mixed although the US10Y did end the session slightly higher.
The coming week is going to be busy with various major items on the agenda although the calendar will be mostly filled with secondary data, and the market will maintain its focus on the latest trade war headlines coming from the US/China. Monday will see a thin schedule, while Tuesday will look for guidance at the Australian NAB Business Conditions/Confidence data for July, the German CPI, German/EU ZEW Economic Sentiment Survey, the UK Unemployment and the US CPI, also for July. Wednesday has the China Retail Sales/Industrial Production figures and then the EU/German Q2 GDP, and the UK Jobs data, while Thursday will feature the Australian Unemployment report, UK Retail Sales and a busy session from the US which will include the US New York State Empire Mfg Index, Retail Sales, Jobless Claims, Industrial Production, Capacity Utilisation NAHB Housing Market Index and Philadelphia Fed Mfg Survey. Finally Friday sees the EU Trade Balance, US Housing Starts, Building Permits and the Michigan Consumer Sentiment Index.
Economic data highlights will include:
Mon: NZ Electronic Card Retail Sales, China Foreign Direct Investment, US Monthly Budget Statement
Tue: NZ Food Price Index, RBA’s Kent Speech, NAB Business Conditions/Confidence, Japan Tertiary Industry Index, Corporate Goods Price Index, German CPI/HICP, UK Unemployment, German/EU ZEW Economic Sentiment Survey, US CPI, API Weekly Crude Oil Stock Inventory
Wed: Japan Machinery Orders, Australian Wage Price Index, WBC Consumer Confidence , China Retail Sales, Industrial Production, Fixed Asset Investment, NBS Press Conference, UK CPI, PPI, RPI, EU/German Preliminary Q2 GDP, US Import/Export Index, EIA Crude Oil Stocks Weekly Change
Thur: EUU Assumption Day Holiday, Australian Consumer Inflation Expectation, Unemployment, China House Price Index, Japan Industrial Production, Capacity Utilisation UK Retail Sales, US New York State Empire Mfg Index, Retail Sales, Jobless Claims, Industrial Production, Capacity Utilisation NAHB Housing Market Index, Philadelphia Fed Mfg Survey
Fri: EU Trade Balance, US Housing Starts, Building Permits, Michigan Consumer Sentiment Index,
Market moves, in brief:
FX: DXY 97.04 (-0.54%)
Bonds: US10Y; 1.749% (+2.20%), German 10Y; -0.577% (-3.11%), UK 10Y; 0.486% (-8.39%), Australian 10Y; 0.953% (-3.53%), NZ 10Y; 1.090% (-1.80 %), China 10Y; 3.022% (-1.22%)
Stock Indices: DJI; -0.34%, S+P; -0.66%, NASDAQ; -1.00%, EUStoxx50; -1.23%, FTSE100; -0.44%, Shanghai Composite; -0.71%,
Metals: Gold $1496 oz (0.00%), Silver $16.96 oz (+0.02%), Copper $2.589 lb (-0.71%), Iron Ore $93.61 per tonne (NYMEX) (-3.86%),
Oil: WTI $54.23 pb (+3.69%)
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