U.S. stock fell to the lowest level in 5 weeks amid growing unease about persistent low inflation. Treasuries gained, while the USD edged lower as investors await central bank speeches at Jackson Hole. The S&P 500 Index hit the lowest since July 6 following back-to-back weekly losses amid the tumult in Washington that imperils the president's policy agenda. In his first speech since last week's departure of chief strategist Steve Bannon, President Donald Trump will give a prime-time address on Afghanistan in which he may announce an increase in troop numbers. While national support for the president remains low after a difficult week, those closest to Trump continue to staunchly defend him. The U.K. government said it is stepping up pressure on the EU in a press conference release over the weekend, which announced the publication of position papers this week. The next round of Brexit talks will begin on Aug.29, with both sides still arguing over the timetable for the start of trade talks. The pound, which is the worst performing Group-of-10 currency last week, is seen as vulnerable to political fallout if the U.K. entrenches a hardline stance.
Yesterday, USDCAD initially declined from 1.2625 down to 1.2588 –a 2 week low before climbing up to 1.2680 in late trade despite a 1.5% rise in oil prices. Just a day earlier USDCAD plunged from 1.2770 – a 1 month high – to 1.2608 despite a 2.5% drop in oil prices. The broad USD downtrend resumed overnight taking USDCAD down to 1.2632 before bouncing back to 1.2660 ahead of the 5:30am Canadian inflation data (CPI). Prices in Canada bounced back after falling the previous month reinforcing investor expectations for another rate hike by the Bank of Canada this year. The CAD has surged as a result with USDCAD breaking yesterday's low of 1.2588 and posting a new 2 week low of 1.2574. The pairing has since climbed back to test the 1.2600 level. Risk aversion flows ensuing from yesterday's market sell-off (DJIA lost 274 points – it's down about 50 pts so far this morning) have subsided today although the JPY has reached a 5 month high vs. the USD on broad-based USD weakness. Gold is above $1,300 – the best since November of 2016. Also, U.S. 10 year yields are down near 2.17% - also near the lowest level since Nov. 2016. Market expectations of a December Fed rate hike are now just 30%.
European stocks and bond yields fell in early trade on Thursday after the Federal Reserve expressed concern over weak U.S. inflation, a trend which has clouded the outlook for the world's largest economy.
Some policy makers argued against future rate rises until there was more concrete evidence that inflation was moving back toward the Fed's objective, according to minutes of the U.S. central bank's last policy meeting. Money market futures are now pricing in about a 40 per cent chance the Fed will raise rates by December, compared with just under 50 per cent before the Fed's minutes.
Investors looking for clues as to the timing of the start of the unwind of the Federal Reserve's $4.5 trillion balance sheet will be closely reading the minutes of the July FOMC meeting when they are published at 11am. The minutes should also provide a guide as to how many policy makers agree with the Federal Reserve Bank of New York President William Dudley that another rate rise may be needed before the end of the year. Unemployment in the U.K fell to 4.4% in the second quarter, the lowest since 1975, with basic wages rising 2.1%, more than economists had forecast. While the Bank of England expects pay growth to remain below the rate of inflation for months to come, the outlook is for price to rise to peak later this year. The British government has also published another Brexit position paper, this time on the Irish border, saying it wants no physical infrastructure on the 310 mile crossing.
Shares rose on Tuesday, while the Japanese yen, Swiss franc and gold all dropped after North Korea's leader signaled he would delay plans to fire a missile towards Guam, easing tensions and prompting investors to buy riskier assets. European shares followed Asian bourses higher, having already risen late on Monday after U.S. officials played down prospects of the standoff between North Korea and the United States leading to conflict. The USD received a boost on better than expected Retail sales.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD had a mixed performance this week although it was the best performing currency on Friday. The loonie was largely unchanged vs. the GBP and AUD while losing ground against the USD, EUR, and JPY. The bulk of the losses were recouped during Friday's session that saw oil prices bounce 2% higher off of 1 week lows near $48 earlier in the session. Global equity markets have been falling most of the week as tensions between North Korea and the U.S. remain elevated. Risk aversion flows benefitted the JPY – the top performer this week reaching a 4 month high vs. the USD and a 6 week high vs. the CAD. Friday's session saw North American equity markets halt a 3 day slide after the U.S. posted lower than expected CPI inflation data. Coupled with weak PPI inflation data released Thursday, the probability of a December interest rate hike by the U.S. Fed has almost halved since early July to just 28.9%. USDCAD found support at 1.2675 on Thursday morning and tested a 1 month high of 1.2753 during Friday's Asian session. The pairing then dropped to a 4 day low of 1.2653. A subsequent attempt to regain the 1.2700 level failed (the pairing briefly tested the 1.2710-15 area after the fall to 1.2653) and USDCAD held a 1.2660 – 1.2685 range for the balance of the session.
Two top U.S. officials sought to ease concerns over possible nuclear conflict with North Korea in television interviews over the weekend. National security adviser H.R. McMaster said "we're not closer to war than a week ago," while Central Intelligence Agency Director Mike Pompeo said he'd seen no intelligence to indicate the U.S. was on the cusp of being attacked. Gold slipped from a 2 month high while the yen and U.S. Treasuries dropped as the fragile twig of peace stayed below melting point. Meanwhile, President Donald Trump faced a 2nd day of criticism after failing to personal denounce white nationalists. Chancellor of the Exchequer Philip Hammond and Trade Secretary Liam Fox published a joint statement over the weekend in which the outlined a common position on a post-Brexit transitional deal for the U.K. The 2 had previously been loggerheads over Britain's exit from the EU. The government is due to publish outlines of its negotiating positions later this week, including its plans for the Northern Ireland border. Investors will also have plenty of U.K. economic data to watch, with inflation, wage, retail sales and unemployment numbers all due this week.
Yesterday, USDCAD initially climbed from 1.2695 up to 1.2735 before falling to 1.2670 on a combination of weak U.S. inflation data (producer prices index) and strong oil prices (near 2 month highs @ $50.20). Risk aversion flows then took over around 7:00am sending North American equity markets sharply lower and oil down nearly 4% to 48.37. USDCAD climbed all the way back – breaking above the intraday high of 1.2735 and extending gains up to 1.2740/45. Concerns over U.S. and North Korea continued overnight with global markets in negative territory for the 3rd straight day. Risk aversion flows saw the JPY rise to a 4 month high vs. the USD (and a 6 week high vs. the CAD) and pushed USDCAD up marginally to 1.2753 – a 1 month high. Risk aversion flows eased through the London session and into North American trade this morning and JPY flows completely reversed. U.S. inflation data (consumer price index) was weaker than expected for the 2nd straight day sending the USD broadly lower. USDCAD opened this morning's session near 1.2724 and dropped to 1.2653 – the low from Tuesday. The move lower was short-lived with USDCAD bouncing back to 1.2716 – the pre U.S. CPI level. The pairing has since declined to 1.2680 as oil prices rebound from session lows and U.S. equity markets move higher on the day.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was the worst performing currency this past week despite oil prices holding near 2 months highs and another solid Canadian employment report that saw the unemployment rate fall to a 9 year low and the addition of 35,000 full-time jobs. The CAD was unable to build on the strong finish from the previous week and steadily lost ground. After opening the week near 1.2433, USDCAD climbed to 1.2668 on Friday – close to a 3 week high. Against the other major currencies, the USD was under pressure for much of the week. EURUSD reached 1.1885, its highest level since January of 2015 before falling to 1.1750 after the U.S. employment data. The AUD came close to 0.80 – the highest since May 2015 before falling to 0.7900. The USD made strong gains on Friday after an all-around solid employment report that included upward revisions to prior data.
Markets remained on cautious footing Wednesday, with investors boosting haven assets from gold to the Japanese yen as tensions grew between the U.S. and North Korea. American Equities fell a second day. Gold headed for its largest increase in 2 months while the yen and Swiss franc posted biggest gains among G-10 currencies. President Donald Trump's warning that North Korea's nuclear threats would be met with "fire fury, and frankly, power the likes of which this world has never seen," is ripping markets across the world. The North Korean army reacted to the statement by announcing it is examining operational plans for a strike on Guam, a U.S. controlled island 2,200 miles south east of Pyongyang. Rhetoric aside, Trump's options for striking Kim Jong Un's regime are probably quite limited.
World stocks inched up to a new all-time high on Tuesday, shrugging off weaker-than-expected China's trade data that clouded an otherwise bright outlook for global growth. Chinese imports and exports both fell well short of forecasts last month and growth in overall trade, while still a healthy 8.8 per cent, was its slowest this year. However, MSCI's all-country world index ticked up to set a new record high at 480.76 points. It was last up less than 0.1 per cent at 480.54 points. The index, which tracks shares in 46 countries, is on track for longest monthly winning streak since 2003. Shares across the globe have been hitting record highs in record low volatility supported by a benign environment for global growth. Ratings agency Fitch this week lifted its outlook for the world economy for this year and next.
At 11am today, the Federal Open Markets Committee will announce its latest monetary decision. With no change in interest rates expected by economists, and no press conference scheduled for after the release, investors will closely read the statement for updated language on inflation and any hints to plans for balance-sheet reduction. In the U.K., the office for National Statistics said there was a notable slowdown in the first half of the year for the British economy when it published growth figures this morning that showed an expansion of 0.3% in the 2nd quarter. The sole positive contributor to the economy in the period was services which grew 0.5%, with production and construction proving a drag. Within services, retail continued to be one of the strongest performers.
The dollar surrendered short-lived gains on Tuesday as concerns about the U.S. economy and politics returned to the fore ahead of a Federal Reserve meeting, while a lack of catalysts kept Asian stocks subdued. The dollar earlier rose on expectations the Fed will signal at a meeting starting later on Tuesday its readiness to begin reducing its bond portfolio at its September meeting.
U.S. stocks fluctuated and the USD weakened to start a week packed with corporate results and a Federal Reserve rate decision, with recent surveys showing that a no change policy is expected. Speculator and hedge-fund net short positioning on the dollar have risen to the highest number of contracts since 2013, according to the latest CFTC report. The euro headed for its first decline in 3 days as data showed the region's economy cooling. The S&P 500 Index fell from near a record as investors kept an eye on Washington, where Jared Kushner prepared to testify to a Senate committee as President Donald Trump's policy agenda remained largely stalled. At a meeting in Russia today, OPEC and its allies indicated they weren't planning any major changes to their deal to cut production. That means there will be no moves to impose output caps on Libya and Nigeria, countries that had been excused from the deal forged November 2016.
Yesterday, USDCAD climbed from 1.2600 up to 1.2640 before breaking below the 1.2580 double-bottom support and triggering stop-loss orders all the way down to 1.2540 – a new 15 month low. The pairing then bounced back to 1.2600 before settling in a 1.2560 – 1.2595 range for the balance of the session. Canadian data was mixed this morning with retail sales headline data beating estimates amidst negative revisions to prior data and worse than expected core data. Headline inflation was also weak although core data was slightly higher. Recent comments from the Bank of Canada suggest that they are willing to look beyond recent low inflation data. USDCAD dropped from 1.2600 down to 1.2546 on the data, just shy of yesterday's 15 month low of 1.2540. Corrective bounces have stalled at 1.2570 and the pairing just broke below 1.2540 to a new 15 month low @ 1.2522 with the May 2016 low of 1.2450 now in play.
World shares extended a run of record highs on Thursday, as a cautious sounding Bank of Japan lifted Asian stocks to a near decade peak and the ECB kept interest rates and forward guidance on QE unchanged. The euro was near a 14-month high and investors were riding a global rally in stocks as Asia's and then Europe's early 0.4 per cent gains ensured MSCI's 47-country All World index was up for a 10th straight session. It is its longest winning streak since February 2015 and was showing little sign of fatigue even as bond yields – the key driver of global borrowing costs – edged higher again. They were lifted as oil prices held near 2 per cent gains made the previous session when falling U.S. crude inventories gave the market a lift ahead of a key OPEC meeting next week.
The European Central Bank begins its 2 days meeting today, and while economists expect no change when the interest rate decision is announced tomorrow, there are stimulus plans being drawn up at the bank for the policy makers to consider when they return from the August break, according to euro-area officials familiar with the matter. Just as OPEC's resolve to continue to reduce production seems to wane, a demand problem may be emerging. China, the world's biggest energy user, is set to see smaller than planned crude processing during the summer as efforts to cut pollution see some of the country's drivers turn to cars fired up by natural gas. Hot on the heels of the failure of the Republican move to repeal and replace Obamacare, the next threat to the previous administration's flagship piece of legislation could come before the weekend. The White House has so far not confirmed that it will pay the monthly subsidy, which helps low income people access health care, due to insurers. The volatile politics surrounding Obamacare has already seen insurers pull back from the plan.
So you're planning a trip to Europe, and you need to figure out the currency exchange process to get Euros ahead of your visit. This is an exciting time, and you've got an exciting trip ahead of you!
The currency logistics of your trip may be made much easier given that a single currency - the Euro - is the primary currency in many countries you'll be visiting. However, there are specific nuances you'll need to pay attention to in your planning, to ensure a smooth trip and a smooth currency exchange process.
Specifically, you'll need to know...