News & Resources

Market Analysis

Latest Insights
Press Releases
Latest Insights

Daily Market Analysis
Another Tuesday Turnaround

by Stephen Casey | August 23, 2016

Good morning. Another Tuesday turnaround is in play this morning, as yesterday’s dollar gains have all been wiped out with a few days before the Jackson Hole symposium. Over the weekend, some hawkish comments from Fed Vice Chairman Stanley Fischer allowed for some profit taking on Monday, as the greenback enjoyed a nice bounce after three straight days of post-Fed minutes declines. Coupled with oil’s three percent slip, foreign exchange markets parted like the red sea for the resurgent dollar. Those gains were short-lived though, as riskier currencies shot higher on Tuesday, rising with global equities a mere seventy-two hours before Janet Yellen’s hotly anticipated Wyoming remarks. The data calendar is light this week so positioning takes a more important role for foreign exchange markets closing out what was a very quiet summer period.

The euro came within ten pips overnight of marking its best move since the June Brexit referendum. Sterling is rising as well, as short covering drives the currency higher and could be marking a strong technical breakout to higher levels. The European slate was guided by French manufacturing and services production figures, which bested expectations for the month of August. This morning’s numbers continue to support the argument that mainland Europe is surviving any Brexit fallout, and specifically France is performing well after months of terrorist attacks. German private sector growth slowed down in August, but remains comfortably vigorous this summer, good signs from the euro-area’s largest economy. Policy speak guided price action in Asia, as the BoJ’s Kuroda and the RBNZ’s Wheeler addressed markets. Speaking at a FinTech conference in Tokyo, Mr. Kuroda echoed old claims the central bank has sufficient time to enact new policy measures. The yen is moving a little higher as North American trade kicks off, similar to the New Zealand dollar, which was the overnight session’s biggest mover. The Kiwi-dollar climbed overnight as Gov. Wheeler preached patience on policy. The Reserve Bank cut rates by 25 basis points to 2% at their last meeting on August 10th.

As early reported, the US dollar mounted a nice little comeback on Monday. Supported by Mr. Fischer’s weekend comments, traders had an excuse to lock in some profit and trim positions ahead of Friday’s Jackson Hole speeches. Speaking at the Aspen Institute in Aspen, Colorado over the weekend, the Fed Vice-Chairman noted a 2016 rate hike is still on the cards as the domestic economy approaches their own targets warranting a move. Top tier economic data releases is back loaded this week as jobless claims, durable goods orders and Q2 GDP revisions roll out over Thursday and Friday. The greenback’s gains were short in nature, as yesterday’s moves were wiped out on Tuesday. This morning, investors will get another peek under the hood of the American housing market. It is expected that 580k new homes were sold last month, after it was reported 592k new homes were sold in June. As employment and stable inflation remain lynchpins for Fed policy, an improving housing market could be what the Fed is looking for as they consider normalization. As of yesterday’s close, traders saw a probability of just below 50% that the FOMC will hike again in 2016.

The Canadian dollar was one of the weaker performing currencies to start the week. Oil fell by as much as 3% on Monday, which resulted in a strong bout of loonie sales. Worries over a rising U.S. oil rig count and growing Chinese fuel exports weighed heavily on crude stocks on Monday, subsequently depressing per barrel prices as well. On Monday, the Canadian buck did get a short-term boost after it was reported that wholesale sales rose 0.7% in June, besting expectations of 0.5%. The rise was brief though as investors turned back on the Fed and commodity markets. Tuesday’s bounce for the Loonie continues its recent ascent versus the greenback and other majors. The rest of the data calendar is light this week so all eyes shall remain on this weekend’s Jackson Hole remarks.

 

To receive our market analysis direct to your inbox daily subscribe here!

“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.

Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.

Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.

This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.

Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.

Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.

FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.

This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.

Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.

The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.

© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.