Daily Market Update

U.S. Dollar hits the brakes, Safe-haven appetite up

July 18, 2019

The U.S. Dollar fell against a few counterparts such as Pound and the Oceanic currencies but maintained tight ranges between all others.

Overview

Once more, we are seeing the Japanese Yen gain off of fears that a trade agreement between China and the U.S. may not be realized soon after talks concluded in discord regarding certain items, particularly technology. This development in turn erased stock gains across the board, thus the current resurgence for safe-haven assets.

The U.S. administration’s officials involved in negotiations with China have outlined concerns with extending Huawei more breathing room and President Trump has mentioned dissatisfaction with China’s limits with American agricultural products. Naturally, markets are displeased and the buck is not weakening as it was earlier in the month. Additionally, some optimism in the form of the Philadelphia Fed Business Outlook came out this morning with a far better reading than expected. Good economic indicators will keep dollar buoyant.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

AUD

The Australian Dollar has improved by 1.7% in the past eight days despite ongoing worry about the lack of a solution to the trade war. Although the reserve Bank of Australia cut its benchmark interest rate at the beginning of the month by 25 basis points, the Aussie has improved as signs of a healthier-than-thought economy have materialized. In particular, the underemployment rate, this fell to 8.2% from 8.6%.

This labor and productivity measure was key in the central bank’s decision to cut to stimulate the economy, but its improvement makes traders doubt that the RBA will cut again in August. If indeed officials can stay away from cuts, expect Aussie to keep rising.

GBP

The Pound is returning to more favorable levels based on a combination of impressive economic data and a surprise in the handling of Brexit. June Retail Sales for the U.K. rose by 0.9%, shocking economists who foresaw a contraction of (-0.2%).

On the political front, Parliament passed an amendment to block the suspension of Parliament during Brexit negotiations and also backed an amendment to prevent a “no-deal” Brexit scenario. Have the tables turned overnight? Not necessarily, but it is clear that legislators are a united front in wanting to not be taken away from debating and voting on how to leave the European Union by October 31st. This deadline is subject to change.

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