Q4 Kickoff: The Loonie is vulnerable


Q4 Kickoff: The Loonie is vulnerable

Michael O’Neill

FX Trade Strategist / http://www.Loonieviews.net

Canada

·

· Canada GDP data misses forecasts and lifts USDCAD

· US NFP report data may be suspect due to hurricanes

· China Golden Week holidays will drain liquidity in Asia

By Michael O’Neill

The US dollar had a mid-morning surge following a jump in Chicago PMI data to 65.2 from 58.9 in August. The tick lower in the Michigan Consumer Sentiment index was ignored as it is coming off a high reading.

Despite the noise, nothing changed.

If you bought or sold USDCAD at 20:00 GMT on August 31 and closed the position on September 29 at 15:00 GMT, you didn’t make or lose any money. It was a waste of time. September is closing, and USDCAD is unchanged. It wasn’t for lack of effort.

The Bank of Canada (BoC) surprised markets with a 0.25 bp rate hike on September 6. The tone of the policy statement was considered hawkish. Economists and strategists pencilled another rate hike for October.

USDCAD plummeted from 1.2412 to 1.2060 that day, then spent the rest of the month recouping those losses. It took USDCAD two weeks to climb 0.200 points and this week, just four days to add another 0.0220 points.

The catalysts for the rally were Fed Chair Janet Yellen and Bank of Canada Governor Stephen Poloz. One was hawkish and the other dovish.

The US dollar rallied when Yellen warned of risks from leaving interest rates too low for too long, advocating a gradual approach to tightening. She said waiting for inflation to hit 2% before raising rates would be “imprudent. ” Her message wasn’t very different from previous speeches and FOMC statements, but FX traders reacted like it was and bought US dollars.

Also, the anticipation of President Trump’s tax plan announcement underpinned USDCAD during the week.

But it was BoC Governor Poloz who gave USDCAD the biggest boost. In a speech on September 27, the Governor stomped all over October rate hike thoughts. He emphasised that monetary policy wasn’t on a predetermined path, rate hikes would be data dependent (as opposed to flipping a coin?) and said that the BoC would proceed cautiously.

USDCAD spiked to 1.2517 on September 27.

Where to from here?

USDCAD is trading indecisively around the 1.2500 area (80.00 cents). The intraday and short-term technicals are bullish. USDCAD has climbed steadily from 1.2060 and if prices are above 1.2240, supported by the break of 1.2435, (38.2% Fibonacci of the June-September range) the target is the 61.8% level of 1.2667.

However, the downtrend from the end of June is still intact if prices are below 1.2500-20. The level is under stress, but has held.

The fundamental outlook contrasts with the technical picture. The Canadian economy is booming. Although July GDP was flat and a tick below, forecasts, it is coming off a torrid first half. WTI oil prices appear to have stabilised above $50.00/barrel. Opec is forecasting rising demand as crude inventories fall.

But every silver cloud has a dark lining. The Nafta renegotiation is a wild card and if the US employs aggressive strategies like 219% countervailing duties on aircraft, USDCAD will behave support. Historically, USDCAD tends to firm in the last quarter of the year.

All the above implies a 1.2200-1.2700 USDCAD range for the balance of 2017.

Chart: USDCAD 4 hour with Q$ trading band forecast

Source: Saxo Bank

The week ahead

Australia starts the week an hour earlier thanks to daylight savings time. China doesn’t start at all. It’s closed Monday and Tuesday for National Day as part of the Golden Week holidays.

Monday, the results of the Catalonia Referendum in Spain (if it happens) could have repercussions to EURUSD. The Spanish government says even holding a vote is illegal and can’t happen.Catalonian leaders disagree.

The Tankan report will be the highlight for USDJPY traders. Eurozone employment, PMI and US Manufacturing PMI data are the key economic reports. USDCAD traders will study the Bank of Canada Outlook Survey.

Tuesday, the Reserve Bank of Australia interest rate decision is due. They are expected to leave rates unchanged, again UK PMI construction data and Eurozone PPI reports will compete for attention. Germany is closed. The US calendar is very light.

Wednesday, there isn’t much in the way of data in Asia. Eurozone Services PMI and the UK Inflation report are the main events in Europe. The US calendar is uninspiring.

Thursday, Australia Retail Sales and trade reports are due. There isn’t any key data from Europe or the US to pull traders from the sidelines as they wait for Friday’s nonfarm payrolls report.

Friday, Asia and Europe will be quiet. The action will heat up (briefly when the US nonfarm payrolls report is released. The forecast is for a gain of 130,000 jobs and a rise to 2.6% in average hourly earnings. The data is likely useless due to distortion from all the Hurricanes.

The week that was

Chart US dollar change vs. currencies in September

Source: Saxo Bank/IFXA Ltd

Monday was a busy day. Asia opened with Kiwi traders trying to make sense out of an election result. There wasn’t a clear winner. The unsettled state of affairs undercut NZDUSD. Japan traders heard a rumour that Prime Minister Shinzo Abe would call an October 22 election. (He did, but not until Wednesday) GBPUSD recovered from Friday’s Moody’s downgrade low. It couldn’t hold the gains and retreated in Europe and New York on Brexit issues.

In Europe, EURUSD was soft, hurt by German election results. Angela Merkel kept her job as Chancellor, but her party lost seats. Gold and oil prices firmed before New York opened.

Risk aversion trades were all the range by mid-morning in New York. North Korea said that the US had declared war on them and threatened to shoot down US bombers, even if they weren’t in N.K. airspace. Gold soared as did yen and the Swiss franc. Oil prices gushed 3.12% higher. Expectations of tighter supply and increased global growth underpinned the market.

Tuesday, Asia FX markets traded with a risk-averse bias. The Bank of Japan minutes didn’t offer any fresh insight. Kiwi was under pressure from soft trade data and the election hangover. The US dollar started the New York session with a bid and climbed steadily. Fed Chair Yellen’s speech didn’t change anyone’s minds about at December rate hike. The dollar rose but pared back some of the gains in the afternoon. Wall Street was flat, and oil prices ended a choppy day at $51.92/b, virtually unchanged.

Wednesday, Asia and European traders bought US dollars, convinced that Janet Yellen’s speech was hawkish. Both sessions were a tad subdued ahead of President Trump’s tax announcement in the afternoon. The greenback opened in New York with a bid. Oil prices rose on falling US inventories. Gold prices slid on the US rate outlook.

US Durable Goods data beat forecasts and crushed USDJPY. The Canadian dollar got thrashed when the Bank of Canada delivered dovish remarks, and the US imposed countervailing duties on Canadian aircraft. Trump’s tax plan left the greenback modestly firmer by the end of the day.

Thursday, the Reserve Bank of New Zealand policy meeting was a non-event. It was expected to be. Asia sold US dollars on the US fiscal stimulus news. In Europe, Sterling came under pressure when Mark Carney warned that monetary policy could not nullify the impact of Brexit. EURUSD recovered on improved Eurozone data. US GDP data was a tad better than expected. Fed speakers, Vice Chair Fischer and Kanasa City Fed President George, were hawkish. Trump announced a new fiscal stimulus plan. And the US dollar couldn’t rally, By the end of the day, the greenback was down across the board with positioning for month-end portfolio rebalancing, getting the blame.

Friday, US economic data provided support to the greenback, helping to offset some of the selling pressure from month-end flows.

Edited by Clare MacCarthy

Michael O’Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank’s social trading platform.

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Dollar index down-channel caps USD rally


Dollar index down-channel caps USD rally

· USDCAD bounces after Canadian retail, CPI data

· Sterling sinks as UK PM May speaks to European Union

· Next week may finish with a bang thanks to month- and quarter-end flows

·

Hazy dreams of a ‘soft’ Brexit appear to be receding from view. Photo: Shutterstock

By Michael O’Neill

Sterling has taken it on the chin in New York trading. UK prime minister Theresa May appears to be putting the boots to dreams of a "soft" Brexit as she addresses the European Union, although the speech is ongoing at the time of writing.

USDX capping greenback rally

The US dollar index has been in a steep downtrend channel since April (and a narrower one since July). Numerous attempts to break above the top of the channel (92.50-70) have failed miserably and until a break occurs, reports of the greenback’s resurgence are premature.

The Federal Open Market Committee monetary policy statement and updated projections gave the US dollar ammunition for a sustained rally. It didn’t happen.

The Fed left the door wide open to another rate hike in December, continued to stress that downward pressures on inflation were transitory, and announced the start of quantitative tightening. Recent US economic data have been decent.

FX traders have reacted as if rising US interest rates don’t matter as much as the European Central Bank’s talk that its own quantitative easing programme may start to taper at some point in the future. Eurozone rates are still negative.

Traders don’t seem to care that Brexit is just as disruptive to the Eurozone as it is to the UK. Also, Spain is having serious issues with Catalonia. The Catalan area wants to hold a referendum to split from Spain on October 1. Spain’s Constitutional Court banned the vote.

USDX:

Source: Saxo Bank

War and peace?

FX markets appear dismissive of geopolitical threats. Russia is conducting large-scale war games near the borders of Lithuania, Latvia, and Poland. The games may be a veiled threat to NATO, as it annoyed Russia when it added troops to that same area last February. It’s not like Russia hasn’t annexed neighbouring territories recently, though…

North Korea is a ticking time bomb (H-bomb?) Is President Trump’s taunting of Kim Jong-un akin to poking a starving, rapid cur?

The Middle East crisis is still precisely that. Saudi Arabia bombs Yemen on a regular basis. Syria is a mess. Israel is rumoured to have bombed a site near the Damascus International Airport on September 22, the third attack this month.

China arbitrarily claimed the South China Sea. It has militarised its man-made islands as part of its creeping take-over of the area. Vietnam, the Philippines, Tawan, Malaysia, Brunei, and the US dispute Beijing’s claim.

Anyone of these areas could explode, resulting in a prolonged period of risk aversion.

Sa’naa, Yemen: Powderkegs aplenty mean risk on many fronts. Photo: Shutterstock

The week ahead

It may be a busy start to the week thanks to elections in New Zealand and Germany. New Zealand’s September 23 vote could be the most disruptive, at least for kiwi traders. As it stands, the incumbent National Party is in the lead. If they win, it should be business as usual. If they don’t, it won’t.

Germans vote on Sunday. Welcome back, Angela Merkel.

Monday may be a busy day in Asia. Traders will deal with the fallout (if any) from the New Zealand and German elections. North Korea’s antics will be another source of drama. If not, German, UK and US economics may have to fill the void. New York Federal Reserve president William Dudley is speaking, as well.

Tuesday, The Bank of Japan Monetary Policy meeting minutes are released. New Zealand’s Trade report is also due and Fed dove Neel Kashkari will be speaking during the early hours of the Asia market. The only other event of note is a speech by Fed chair Yellen at 1600 GMT. It should be a non-event as not much has happened since the FOMC press conference.

Wednesday may be off to a slow start in Asia but it will pick up in Europe. UK GDP data may be a big deal following on the heels of PM May’s EU speech. After that, if US Durable Goods and Pending Home Sales data don’t get things going it will be a quiet New York session. USDCAD traders need to pay attention to Bank of Canada governor Stephen Poloz’s speech on Wednesday.

Thursday, The Reserve Bank of New Zealand monetary policy decision is due. Rates are expected to be left unchanged by acting governor Grant Spencer. There is a good mix of data in Europe including German inflation, but traders will be focusing on the US GDP data.

Friday, USDJPY traders will digest a banquet of domestic data including inflation and employment reports. Eurozone CPI data and German employment will be the highlights in Europe. New York trading could get messy around the 1600 GMT fix. It is month-end, quarter-end and Japan ½ year-end. US data includes PCE, Chicago PMI and Michigan Consumer Confidence.

The week that was

Monday started quietly, in part because Japan closed for a holiday. Traders were in wait-and-see mode ahead of Wednesday’s FOMC meeting. In Europe, USDJPY climbed on rising Treasury yields. EURUSD rallied after the Eurozone inflation report. New York was busy. GBPUSD retreated when Bank of England governor Mark Carney appeared to downplay the risk of a UK rate hike due to Brexit concerns. Bank of Canada Deputy governor Timothy Lane injected two-way risk into USDCAD when he said that the Nafta negotiations could become an issue.

Tuesday, “upbeat” Reserve Bank of Australia minutes boosted AUDUSD. USDJPY traders heard rumours that the Prime Minister would call a snap election. EURUSD traded sideways and continued that when in New York while ignoring a slew of economic reports. President Trump had everyone’s attention as he addressed the United Nations. It proved to be a non-event for FX markets. The day ended with the greenback a little worse for wear. US Housing data, Current Account and Import/Export data were ignored.

Wednesday, NZDUSD and AUDUSD inched higher in Asia. Kiwi got a boost from a narrower than expected Current Account deficit and on expectations of a dovish FOMC meeting. Sterling soared in Europe after a stellar Retail Sales report. Oil prices were trading around the $50.00/b level on hopes that Opec extends production cuts. The US dollar opened in New York with small gains across the board. It didn’t finish that way. The FOMC statement and projections were deemed hawkish, and the US dollar rallied.

Thursday, AUDUSD and NZDUSD drifted lower in Asia and Europe and then traded sideways until the end of the New York session. USDJPY retained its post-FOMC gains but didn’t extend them. The Bank of Japan left rates unchanged but had one member dissent. EURUSD found a bottom early in Asia and then drifted higher until the New York close. Sterling traded narrowly until mid-morning in New York and then it soared, rising from 1.3472 to 1.3584. A report that UK PM May would ask the EU for a two-year post-Brexit transition period fueled gains. The Dow Jones Industrial Average winning streak ended at nine.

Friday, a bout of risk-aversion swept through Asia after a report suggested that North Korea would conduct a H-bomb test in the Pacific Ocean. USDJPY recouped half of its losses in early New York trading while EURUSD and GBPUSD traded near their overnight peaks.

GBPUSD:

Source: Saxo Bank

— Edited by Michael McKenna

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Not so great expectations for next week’s FOMC meeting 15Sep17


Not so great expectations for next week’s FOMC meeting

Michael O’Neill

FX Trade Strategist / http://www.Loonieviews.net

Canada

· US data supports continuing caution by FED

· Weekend worries include Trump’s response to North Korea missile threats

· EURUSD may be ripe for a correction ahead of FOMC meeting

·

This week’s data gave no reason to believe the Fed is preparing

to shift from its cautious outlook. Photo: Shutterstock

By Michael O’Neill

The Friday dump of US data was disappointing for those looking for economic reports to improve the Fed’s cautious outlook for the economy. They didn’t get, it although Hurricane Harvey likely had a negative impact.

Is EURUSD ripe for a correction?

FX markets have low expectations going into next week’s Federal Open Market Committee meeting. One of the reasons is because the supposedly “data-dependent” Fed hasn’t seen a lot of data to shift it out of its cautious stance.

A month ago, New York Fed president William Dudley said he supports another interest rate hike. Last week, he didn’t sound so sure. He said “gradually increasing rates was still appropriate. Another FOMC member, Lael Brainard, expressed concern about recent low reading for inflation and argued for a more gradual pace of rate increases.

That doesn’t bode well for rate hawks or US dollar bulls.

The FOMC is widely expected to announce that balance sheet tapering will begin in December. Quantitative easing was always described as “unconventional monetary policy.” That’s because it had never been done before with the scope of the US action. Flooding the market with cheap money appears to have fulfilled its objective of bolstering the economy. Conversely, draining the economy of cheap money can’t be viewed as being good for the economy.

In Europe, the European Central Bank stimulus programme is still going strong. Mario Draghi even warns that it could be extended. ECB rates haven’t gone anywhere. The deposit facility rate is minus 0.40%.

US rates have risen four times since December 2015. The last increase was June 2017. Since the June rate hike, EURUSD has rallied 8.5%.

Something is out of whack and in my opinion its EURUSD. The 16.5% rally since the beginning of the year is overdone and leaves the currency ripe for a correction.

EURUSD daily with Fibonacci retracement levels:

Source: Saxo Bank

The week ahead

It is FOMC decision week. Often, that means markets stay close to home before the announcement on Wednesday afternoon. That may not be the case this week, though – it depends on how President Trump responds to North Korea’s latest missile launch. The Friday morning missile launched proved that North Korea could hit Guam.

Monday, Eurozone inflation data will be released. Headline CPI is forecast unchanged, at 1.5% year-over-year while Core CPI will dip to 1.2% from 1.3% y/y.

Tuesday, the Reserve Bank of Australia minutes are released which will be of interest to AUDUSD traders. In Europe, German ZEW and minor Eurozone data are due. US economic reports include Housing Starts, Building Permits Import/Export prices, and Current Account. The tone of this data may set the tone for the FOMC meeting.

Wednesday will be quiet in Asia and Europe. In the UK, sterling traders will focus on UK Retail Sales for additional confirmation of a Bank of England rate hike in November. The FOMC is expected to leave rates unchanged but announce the start of the tapering programme. They will use the twin hurricanes as an excuse for caution on rates.

On Thursday Asia will react to the FOMC results. The Bank of Japan policy meeting and press conference are on tap. After that, there isn’t much top-tier data anywhere to inspire FX trading

Friday, New Zealand traders will be sidelined awaiting the results of the following day’s election. The National Party and Labour Party are virtually tied in polls. The Eurozone releases PMI data as do France and Germany. Canada CPI and Retail Sales reports will reopen the discussion for an October rate hike.

The week that was

Change in US dollar from September 8 EOD to September 15 (1415 GM):

Source: IFXA/Saxo Bank

On Monday, a collective sigh of relief lifted the so-called risk assets around the globe. North Korea did not detonate any H-bombs or launch any missiles, and Hurricane Irma lacked a knock-out punch.

USDCHF and USDJPY rallied at the Asia open and continued non-stop until the end of the New York session. Gold prices gapped lower, falling from $1,346.55 to $1,326.41 by the US close.

China PPI and CPI data were better than expected. The rest of the global data calendar was light. Oil prices bounced erratically in a $47.03-$48.24/barrel range. The US dollar finished with gains across the board except against the Canadian dollar, which was unchanged.

Tuesday in Asia, risk aversion worries faded. USDJPY forged ahead. AUDUSD suffered briefly after weak Business Confidence data. NZDUSD rallied with the improved risk tone. Sterling soared on better-than expected data, including CPI. It got an assist from relief that the government’s Brexit bill passed.

The New York session was busy, and the dollar was in demand (except against sterling) US treasury yields climbed and so did USDJPY. Opec’s monthly oil report predicted increased crude demand and lower production. Oil prices rallied and continued to do so for the rest of the week. The day ended with Wall Street posting record closes for the three main indices.

USD index:

Source: Saxo Bank

Wednesday, the Asia and European FX sessions were noisy but the US dollar opened in New York almost unchanged from Tuesday’s close. The USDJPY rally paused when President Trump suggested that North Korea needs more than sanctions. European Commission president Juncker gave an upbeat outlook for the EU. Sterling got spanked when wage inflation data was weak. Republican House Speaker Paul Ryan’s announcement that an outline of a proposed tax plan would be released during the last week of September led to broad US dollar gains. WTI oil prices gained 2.2% when the International Energy Agency said that the global oil surplus was starting to shrink. Wall Street closed at record highs, again.

Thursday, Australia employment surged and with it, the AUDUSD. China IP and Retail Sales data were weaker than forecast. NZDUSD was undermined by election polls showing a tight race between the National Party and Labour. In Europe, the Swiss National Bank left interest rates unchanged, as expected but complained about the overvalued Swiss franc. The Bank of England also maintained policy rates but warned that some stimulus would need to be removed soon. Sterling soared, rising from 1.3155 to 1.3367. It traded steadily higher the rest of the day and closed in New York at 1.3402.

The US dollar surged when headline and core inflation data beat expectations. US August CPI rose 1.9% y/y (forecast 1.8%), and CPI-ex-food and energy rose 1.7% (forecast 1.6%, July 1.7%, y/y). FX prices churned and burned around the data and the US dollar closed mixed. The USDJPY rally stalled on a rumour (which proved true) of another North Korea missile test.

Friday, North Korea launched another missile and terrorists struck London, again. Sterling rallied when a dovish MPC member sounded hawkish. EURUSD traded firmer on broad US dollar weakness with a soft US Retail Sales report not helping.

— Edited by Michael O’Neill

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Tapering ECB Expectations 1Sep17


Tapering ECB expectations

·

· Disappointing NFP data sinks US dollar

· Pending ECB meeting keeping traders on their toes

· BoC could hike rates on Wednesday

Next week’s ECB meeting will determine whether QE

will be D(emonstrandum) or not. Photo: Shutterstock

By Michael O’Neill

The European Central Bank policy meeting, statement, and press conference are slated for Thursday. It could be a game-changer…

FX markets are debating the chances of the ECB announcing a quantitative easing plan. One group believes that the steep rise in EURUSD this year and a poor inflation outlook argue for the status quo. Another believes that the ECB will announce that tapering will begin at a later date without revealing any details.

A third group believes that the ECB will announce QE but with a relatively small monthly size

All the above are concerned with the tone that Mario Draghi will adopt for his press conference. Will he be his usual cautious and dovish self, or will he pat the ECB on the back for a job well done?

A dovish Draghi and/or no taper announcement should lead to EURUSD selling. However, the drop could be limited due to expectations that tapering will happen in 2017.

If so, EURUSD is still a “buy on dips”

Beware the sixth of September

The "sixth of September" is unlikely to replace the "Ides of March" for historical infamy, but it could do serious damage to USDCAD bulls.

On August 31, Statistics Canada reported that GDP rose an eye-popping 4.5%, in Q2, annualised. The 3.7% that was forecast was considered to be strong, but the actual data were a game-changer.

The July 12 Monetary Policy Report upgraded Q2 GDP to 3.4% from 3.1% and is looking for Q3 growth to rise 2.8%. It also noted that the output gap had narrowed significantly. The latest GDP report suggests that the output gap may have already closed. If so, a rate hike on September 6 is a strong possibility.

Source: Bank of Canada MPR

The intraday and short-term USDCAD technicals are bearish. The September 1 break of major support and the 2017 low in the 1.2415-60 range opens the door to further losses. The 61.8% Fibonacci retracement level of the July 2014 low of 1.0630 and the January 2016 peak of 1.4688 is at 1.2180. The intraday technicals suggest that previous support between 1.2415-1.2460 area will revert to resistance.

USDCAD daily with Fibonacci levels:

Source: Saxo Bank

The week ahead

Welcome back, liquidity. Happy Labour Day, Canada and the US. This week will be extra-busy thanks to the long awaited ECB meeting on Thursday. The Reserve Bank of Australia and the Bank of Canada hold meetings on Tuesday and Wednesday, respectively.

Monday, whatever volatility that occurs will be seen in Asia if Australia’s TD Securities Inflation report or Company Profits report sparks any trading interest. After that, the only data of note is Eurozone PPI and UK BRC like for like Retail Sales. The day ends when the Europe leaves since Canada, and the United States are closed.

Tuesday, FX markets should come back to life. The RBA will leave rates unchanged Traders will be looking to the tone of the statement for direction which is expected top be neutral. China Service PMI could also cause a kerfuffle if the data misses the forecasts in a big way.

Europe will deal with Swiss inflation data, Markit Services PMI reports from the Eurozone and individual countries, as well as Eurozone GDP and Retail Sales. UK Services PMI and Inflation Report Hearings are also due.

If the European/UK data don’t spark a trading frenzy, the US session will be dull.

Wednesday, New Zealand traders will react to the GlobalDairyTrade auction results released earlier. AUDUSD will be vulnerable to Q2 GDP data which could surprise to the upside. European data is almost non-existent.

US data include the ISM Non-manufacturing PMI, Markit Services PMI, and Trade Balance. It’s a big day for Canada. The Bank of Canada could catch markets by surprise if it raises rates by 0.25 basis points, which is a possibility following the August 31 Q2 GDP report.

Thursday, China Foreign Reserves and Australia Trade data will distract traders in Asia, while everyone else awaits the European Central Bank policy statement and press conference. Will the strength of the euro really derail a tapering announcement?

Friday, Japan GDP and China trade data are the key reports in Asia. The UK will be in the spotlight in Europe, thanks to a slew of data releases. They include Consumer Inflation Expectations, Manufacturing and Industrial Production and Trade. US data is scarce and will be a non-factor. Canada releases its employment report.

The week that was

This week was supposed to be lively, and it was.

Monday, Asia chose to deal with the disappointment with the lack of insight from Yellen and Draghi speeches at Jackson Hole., by doing nothing. The UK Bank holiday sucked the lifeblood out of European trading. US traders were uninspired, and the dollar finished on a mixed note

Tuesday opened with North Korea missiles leaving contrails of risk aversion in Asia and Europe. Gold prices soared. USDDJPY and USDCHF led the greenback down. Risk aversion vanished in the New York session. The dollar recovered all its overnight losses as President Trump didn’t say anything to inflame the situation. The raging flood in Houston was also a distraction.

Wednesday, Asia and European activity were subdued. Nevertheless, the US dollar opened in New York with small gains. US GDP and ADP employment data beat forecasts, igniting another round of dollar demand. The greenback finished the New York day with healthy gains all around.

Thursday, FX markets were active. NZDUSD sank after a weak Business confidence report. AUDUSD didn’t get any benefit from better than forecast China Manufacturing PMI data. USDJPY added to Wednesday’s GDP powered gains. EURUSD was under pressure.

Everything changed during the New York session. Month-end rebalancing flows were missing in action, US data was mixed but Eurozone inflation rose. That led to US dollar selling which snowballed. USDCAD plummeted after Canada GDP rose 4.5%, beating forecasts. The US dollar ended the month with losses against Euro, Yen and Swissy. The New Zealand dollar was the biggest loser in the month followed by Sterling, Aussie and the loonie.

Friday, It was a subdued Asia and European session with traders waiting for US nonfarm payrolls. A weaker-than-expected nonfarm payrolls report crushed the US dollar.

The US came up short in the jobs department. Photo: Shutterstock

— Edited by Michael McKenna

Michael O’Neill is an FX consultant and currency strategist at Loonieviews.net

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