The market got its 25 basis-point US interest rate cut! And then it got a somewhat confusing speech from Fed Chair Powell implying to many that it is a “one and done” cut and then leaving the door open for perhaps a further cut somewhere down the road.
What really rattled markets though, was what followed on Thursday and Friday. More tariffs on China and sanctions on Russia, as well as the US pulling out of the 32-year-old Intermediate-Range Nuclear Forces Treaty with Russia. Safe-haven trades of long yen, long Swiss franc and long Gold ensued accompanied by Bloomberg headlines of “Swiss Franc Hits Highest Level in Two Years on Trade Tensions” and “Russia’s Ruble Slides as Trump Orders New Round of Sanctions.” Oil whipsawed down nearly 8% on Thursday before recovering 2.37% on Friday.
New British Prime Minister, Boris Johnson did nothing to alleviate worries about a no-deal Brexit and the British Pound suffered as a result, weakening significantly against the yen, dollar and Euro. Both Euro GDP and CPI beat analysts’ expectations, as did Australian CPI and Canadian GDP. US payrolls numbers hit the mark although US unemployment rose slightly to 3.7%.
In all it was a hugely exciting trading week with something in it for everyone whether that be long term trend followers (Gold, GBPJPY, CHF, EURGBP), mean-reversion traders (Oil), Volatility traders (VIX), Sterling bears (Thanks Mr. Johnson) or just “seat of your pants” traders loving Mr Trump’s Twitter interventions.
This week, the main economic data is non-US and is no less exciting for those who are following the fortunes of Australia, New Zealand, Canada Japan and China. We have interest rate decisions from the Reserve Bank of Australia and the Reserve Bank of New Zealand, Canadian and New Zealand employment numbers, Japanese GDP and China CPI.
The New Zealand dollar is hovering above multi-month lows and Monday’s Q2 employment number is unlikely to set the New Zealand dollar spiking higher. Unemployment is expected to have risen to 4.3%. Wednesday’s interest rate announcement is likely to reveal a cut in interest rates to 1.25%
On Tuesday the Reserve Bank of Australia is likely to keep interest rates on hold at 1.00%. Governor Philip Lowe will testify to the government in Canberra on Thursday. Japanese GDP, late on Thursday evening is expected to print a rather drab 0.6% for the second quarter.
On Friday China CPI Y/Y for July is expected to read 2.7% and Canada is expected to have added 12,000 new jobs with unemployment remaining at 5.5% The UK will also release its GDP report which is expected to have fallen to 1.4% Y/Y for the 2nd quarter. The main US data is the ISM services report for July on Monday with the Index expected to have increased to 55.5 from 55.1. Other than that, traders will be on the look-out and ready to react to President Trump’s announcements and Tweets!
Last Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You Can Too.
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