US dollar strengthens amid Brexit concerns and US-China tensions
September 3, 2019
Investors move towards safe haven assets as global trade tensions and uncertainty continues. UK Parliament will meet this evening to vote on Boris Johnson’s latest Brexit deal. The Trump administration rejected China’s request to delay tariffs implemented over the weekend. US and China officials disagree on a meeting this month.
This week’s data line up:
Tuesday: RBA Rate Decision; Canada Markit Manufacturing; US Markit Manufacturing; US ISM Manufacturing
Wednesday: US MBA Mortgage Applications; US Trade Balance; Bank of Canada Rate Decision
Thursday: US ADP Employment Change; US Initial Jobless Claims
Friday: German Industrial Production; Italy Retail Sales; Eurozone GDP; Canada Employment Data; US Employment Data
September 3, 2019
EUR/USD 1.0947 GBP/USD 1.2033 USD/CAD 1.3358 AUD/USD 0.6737 USD/JPY 106.25 USD/CNH 7.1846 USD/ILS 3.5436 USD/MXN 20.0250 USD/CHF 0.9897 USD/INR 72.3880
Dollar index is slightly higher this morning, climbing to its strongest level in more than two years given the risk-off sentiment across the board.GBP
Sterling falls to $1.1959 as concerns of a no-deal Brexit escalate. The pound broke below its recent trading range, and the next support would be the low at $1.1841 from October 2016. Prime Minister Boris Johnson wants the UK to exit the European Union with or without a deal. Parliament will vote on his strategy this evening and if Johnson loses this vote it could trigger a general election. The uncertainty of a general election, thought to either give PM the mandate to exit the EU without a deal or put anti-business Labor government in control, is causing the downward movement for GBP/USD.EUR
The euro slid to a 28-month low against the US dollar as traders expect ECB to announce more negative interest rates at their meeting next week. The ECB currently has a benchmark rate of -0.40%, and the market is pricing in an 80% probability of a 20 bps rate cut. Economic data from the eurozone has been weak with Monday’s PMI signaling that manufacturing has contracted for the last seven months.CAD
The Canadian dollar weakened to its lowest level in almost three months following lower oil prices. WTI crude oil fell 2.2%, trading around $53/bbl. Global trade tensions are causing investors to anticipate a signaling of future rate cuts at next Wednesday’s Bank of Canada meeting.ASIA/PACIFIC
The Japanese yen erased earlier losses in the trading session as uncertainties and trade tensions boost demand for safe haven currencies.
Australian’s RBA left interest rates at 1% - largely anticipated by the market - and they did not signal forthcoming rate cuts. AUD/USD was lower ahead of the news but reversed losses following the release. The currency pair remains mostly unchanged with the low from Aug 7 (0.6677) continuing to hold as support.