Good morning. The US dollar has touched a seven-week-low in the wake of yesterday’s Fed meeting minutes release. A divided Federal Reserve committee has pushed the greenback lower over the last day or so as investors around the world push out the next rate hike (more analysis below). Elsewhere in markets, most stocks continue to rise as the old adage “no news is good news” rings true for traders seeking actual return. Good news out of Australia and Great Britain pushed their respective currencies overnight as North America is poised for another quiet open.
Australian employment figures kicked things off on Thursday – showing a huge 26.2k increase in jobs for the month of July. Driven by part-time roles, the Aussie surged higher on the result, coupled with an increase in the participation rate and a nice dip in the headline unemployment rate. Unfortunately, those gains were short-lived as oil prices dipped, spearheaded by Brent crude which could not hold the crucial $50-per-barrel mark. Likewise, the New Zealand dollar fell, dragged lower with other risky currencies as some investors took profit. The Nikkei, one of the weakest performers, touched a two-week low pushing up the safe-haven yen which found a lot of support in the cross-community. Notable crosses such as NZD/JPY and GBP/JPY fell hard again, becoming popular trades of late. Speaking of the UK, strong retail sales did provide for some relief for sterling, which jumped more than 100 points on Thursday. Despite the Brexit outcome, shoppers in the UK did go on living in July, as retailers showed a very robust 1.4% gain over the previous month. The euro saw similar gains as construction output and consumer prices for the euro-area bested the market’s expectations. The EUR/USD rate has closed above strong technical resistance levels for two consecutive days now and has some wondering if higher levels are in the cards.
It is Thursday which means weekly jobless claims are on the docket here in the US. This morning, Wall Street reported that 262k Americans filed first-time unemployment claims for the week ending August 12th. It is another strong employment number for the US, one sector which has consistently performed well during an otherwise pathetic recovery. Speaking of pathetic recoveries, the FOMC minutes from July’s meeting hit the wires on Wednesday. Yesterday afternoon, markets got a good look inside the July meeting, which showed policymakers in the US remain divided on where to go with rates. The immediate reaction for the dollar was lower despite what really could be construed as a more neutral/hawkish tone from the minutes. Some committee members remain concerned over the Brexit fallout and performance of the American economy, while a faction expressed optimism over both, even pushing for higher rates sooner than later. On inflation, policymakers “suggested that the committee would likely have ample time to react if inflation rose more quickly than they currently anticipated,” leaving a lot of interpretation on wages for this month’s employment report. Chairman Yellen will be speaking next on August 26th at the annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming. Right now, the market gives a 12% chance for a hike in September, a 15% chance for November and a 48% chance for December.
The Canadian dollar was one of the immediate benefactors following yesterday’s FOMC minutes release. The Loonie continues to grind higher, now on two-month highs, taking advantage of the weaker greenback. On Wednesday, the US Energy Information Administration reported a drop in crude oil stocks for the week ending August 12th – the first such drop in almost a month. As a result, oil prices charged higher again, getting as high as $47-per-barrel. While we noted this week, the correlation between oil and the Canadian dollar has reached a medium term low, the correlation isn’t dead and oil remains a strong short-term indicator. Tomorrow, July inflation is reported, no change over the previous month is expected.
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.