USD Inches Lower on Trade Talk Hopes

The USD inched lower on reports that US-China trade talks would resume. Today's quieter calendar includes speeches from BoC and Fed members.

Previous Day's Market Highlights

Sterling continued to trade in the 1.11-1.12 band against the euro and around 1.27 against the dollar. Euro-dollar regained 1.14. The dollar softened at the end of the end of the week on reports that trade talks between the US and China would continue. Markets hope this could improve trade tensions and this hope helped reduce risk aversion.  
 
The Canadian dollar rallied sharply after Canadian CPI accelerated more quickly than expected, with headline inflation rising to 3.0% and core CPI averaging around 2.0%, according to several measures. This is the highest headline inflation has been since 2011. The jump in the loonie pushed sterling-loonie back towards 1.66. The sharp rise in inflation contributed to expectations of rising interest rates in Canada, although the Bank will need to determine whether the rise is a result of temporary factors or a sustained trend. Markets are currently pricing in a rate hike in October, with some investors anticipating a move as soon as September.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1160 1.1294 1.1073 1.96%
GBP/USD 1.2738 1.3213 1.2666 4.14%
EUR/USD 1.1414 1.1750 1.1301 3.82%
GBP/AUD 1.7447 1.7825 1.7284 3.04%
GBP/NZD 1.9258 1.9457 1.9077 1.95%
GBP/CAD 1.6648 1.7305 1.6596 4.10%

Today's Market Highlights

The calendar gets off to a quiet start today. The only items of note are speeches from the Bank of Canada’s Wilkins (14:15 BST), which will be more closely watched following Friday’s surprise acceleration in inflation, and the Fed’s Bostic (16:00). In light of the quiet calendar, rates may remain around familiar levels.
 
Wilkins will be participating in a panel discussion at the Central Bank Research Association in Frankfurt. Any comments signalling that the gains in inflation are likely temporary and might have a limited impact on the BoC’s interest views could weigh on the loonie, while signs that the Bank may become more hawkish could further strengthen it. Bostic is expected to speak on the economic outlook. In the evening, RBA Governor Lowe will speak at an Australian Securities and Investments Commission event.
 
Highlights this week include the latest meeting minutes from both the Fed and the ECB, as well as Eurozone PMIs, US Durable Goods Orders, and the Jackson Hole Symposium, the annual gathering of global central bankers in Wyoming. This year’s topic is “Changing Market Structure and Implications for Monetary Policy”. Overall, given the quieter data calendar, geopolitics will remain the key driver of FX movement this week.

Today's Economic Calendar

Time Currency Release Consensus Previous
2:15pm CAD BoC's Wilkins Speaks
4:00pm USD Fed's Bostic Speaks
11:00pm AUD RBA Governor Lowe Speaks
2:30am AUD RBA Meeting Minutes

Caxton