• Michael Moran , Senior Currency Strategist at ACY Securities


• 13.08.2021 10:30 am
trading

Kiwi Stumbles, Pound Retreats, Wall Street Stocks End Mixed

Summary: Welcome to Friday, the 13th of August! Unlucky for some, but not FX traders. US Treasury bond yields firmed and the Dollar grinded higher as the debate on whether the Federal Reserve will begin to ease stimulus continued. San Francisco Fed President Mary C. Daly said that “Tapering of asset purchases could start as soon as this year”, according to the Financial Times. On Wednesday, Richmond Fed President Barkin said that US policymakers could reduce its crisis-era support for the economy. The benchmark US 10-year Treasury bond yield rose 3 basis points to 1.36%. Producer Prices in July increased almost double what economists expected, matching June’s rise. The Dollar Index (USD/DXY), a popular measure of the Greenback’s value against a basket of 5 major currencies grinded higher to 93.02 from 92.90. New Zealand’s Kiwi, yesterday’s outperformer, had its wings clipped, stumbling 0.57% back down to earth at 0.6999 (0.7042 yesterday). The Australian Dollar slid back down to 0.7337 from 0.7375 as the country’s largest city Sydney went into the seventh week of a hard lockdown due to an outbreak of Covid-19 cases. Sterling was pounded lower to 1.3807 from 1.3865 after data released saw UK Industrial and Manufacturing Production lower than expected. The EUR/USD pair dipped to a 1.1735 finish from 1.1742 yesterday. Against the Yen, the Dollar was little changed, settling at 110.43 (110.41). The Greenback ended marginally higher against the Singapore Dollar at 1.3579 (1.3562) while USD/CNH (Dollar vs Offshore Chinese Yuan) settled flat at 6.4785.

(Source: Financial Times)

Wall Street stocks were mixed. The DOW closed at 35,523 (35,490) while the S&P 500 was last at 4,460 (4,450). Global bond yields were little changed. Germany’s 10-Yr Bund yield closed at -0.46% (-0.47%). Japanese 10-year JGB bond yield settled at 0.02% (0.03%). Australian 10-year treasury yield was last at 1.18% from 1.22% yesterday.

Data released yesterday saw UK RICS House Price Balance in June ease to 79.0% from 83%, matching forecasts at 79.3%. Japanese Annual July PPI rose to 5.6% from 5.0%, beating estimates of 5.1%. Australia’s Q3 M1 Inflation Expectations eased to 3.3% from 3.7%. New Zealand’s Q3 RBNZ Inflation Expectations rose to 2.27% from a previous 2.05%. UK Q2 Preliminary GDP rose 4.8%, matching forecasts at 4.8%, and better than the previous month’s revised down -1.6% result. UK Annual Industrial Production in June slipped to 8.3%, missing forecasts at 9.4%. Britain’s monthly Industrial Production slid to -0.7%, underwhelming expectations of +0.3%. UK June Manufacturing Production eased to 0.2%, missing forecasts at 0.4% but better than May’s -0.1% (monthly basis). US July PPI (m/m) beat forecasts 1.0% from 0.6% and (y/y) at 7.8% against forecasts of 7.3%. US July Core PPI (m/m) climbed to 1.0%, better than estimates at 0.6%.

- NZD/USD – The Kiwi reversed its gains made yesterday, sliding to 0.6999 from its opening at 0.7042 yesterday on the broadly based stronger US Dollar. NZD/USD hit an overnight peak at 0.7047 before sliding to its close in New York. New Zealand’s 10-year bond yield slipped 2 basis points to 1.79%.

- GBP/USD – The British currency fell under the weight of the overall stronger US Dollar despite mixed economic data. GBP/USD finished at 1.3806 in New York after testing a fresh monthly and overnight low at 1.37944.

- AUD/USD – Australia’s largest city, Sydney, continued to grapple with its hard lockdown for the seventh week due to a coronavirus outbreak. The Australian Capital Territory, where the seat of government in Canberra is located went into a 7-day lockdown two days ago. The Aussie slid to an overnight low at 0.7332 before settling at 0.7337 (0.7365 yesterday).

- EUR/USD – The shared currency dipped to close at 1.1735 in New York from 1.1745 yesterday. Broad-based US Dollar strength weighed on the EUR/USD pair. Overnight low traded was at 1.1724.

On the Lookout: Today’s economic data calendar picks up, and its Friday. New Zealand kicked off with its Business NZ PMI for July a few minutes ago, which rose to 62.6 from 60.7 in June. There were no forecasts given. NZD/USD edged up to 0.7004 from its 0.6999 close on the release.

New Zealand’s June Annual Visitor Arrivals follow (f/c 2501.3% from a previous 2531.6% - FX Street). Japanese Foreign Stock and Bond Investment follows (no forecasts given, previous data were JPY 3.2 billion and JPY 225.6 billion respectively). Australia releases its July HIA New Home Sales report (no forecasts given, previous was 14.8%). Europe follows next with Germany’s July Wholesale Price Index for July (y/y f/c 11.6% from 10.7%, m/m f/c 1.3% from 1.5% - FX Street). Next up is France’s Final July Inflation Rate (y/y f/c 1.2% from 1.5%, m/m f/c 0.1% from 0.1% - ACY Finlogix). Eurozone Trade Balance for June (f/c +EUR 12 billion from previous +EUR 7.5 billion, seasonally adjusted – FX Street). The US releases its July Import prices (m/m f/c 0.6% from 1%), export prices (m/m f/c 0.8% from 1.2% - ACY Finlogix). US August Preliminary Michigan Consumer Sentiment (f/c 81.2 from 81.2 – ACY Finlogix) and Preliminary University of Michigan Inflation Expectations (no forecasts given, previous was 4.7%) round up the day’s data reports.

Trading Perspective: The taper debate will continue to drive the Dollar against its rivals. While there are no central bank speeches scheduled for today, news reporters could probe officials. Markets will continue to monitor whether the latest spike in inflation is temporary through data releases. Today sees the release of US Michigan Consumer and Inflation Conditions, Sentiment, and Expectations.

The US 10-year bond yield is still key for the Greenback. Yesterday it rose 3 basis points to 1.36%. It hit a low at 1.17% earlier this month. Ten-year US bond rates peaked in March at 1.74%. Just to keep things in perspective.

- EUR/USD – the Euro was marginally lower against the Greenback, finishing at 1.1735, which is mid-range this week. EUR/USD has immediate support at 1.1720 (overnight low 1.1724) followed by 1.1690. Immediate resistance lies at 1.1750 (overnight high 1.1748) followed by 1.1780. The shared currency’s trading has remained remarkably stable. As we approach the end of the Northern Hemisphere summer break, things should start to heat up. Happy days.

Look to trade a likely range today of 1.1720-1.1770. Prefer to sell rallies.

- GBP/USD – In contrast to the Euro, Sterling slid 0.43% versus the Greenback to finish at 1.3807 (1.3867 yesterday). The Pound was also lower against the EUR (EUR/GBP climbed 0.38% to 0.8500 from 0.8465 yesterday). A slowdown in UK Manufacturing and Industrial Production saw Sterling bulls being squeezed lower. Yesterday UK Finance Minister Rishi Sunak said that the economy was recovering very strongly, despite mixed data. GBP/USD has immediate support at 1.3790 (overnight low 1.3794) followed by 1.3760. Immediate resistance can be found at 1.3840 and 1.3880 (overnight high traded 1.3879). Look to sell into strength in a likely 1.3785-1.3885 range today.

- AUD/USD – slip-sliding away, just like the State of New South Wales and now the Australian Capital Territory. To the Covid-19 induced strict lockdowns. If continued, the tight restrictions will have a negative effect on the Australian economy. Next week is a big data week and could be crucial for the Aussie. On Monday the Chinese trifecta of Retail Sales, Industrial Production and Fixed Asset Investment are released. Australia releases its Employment report on Thursday. Immediate support lies at 0.7330 (overnight low 0.7332) followed by 0.7300. Immediate resistance can be found at 0.7355 and 0.7385. Look for the Aussie to trade a likely range today of 0.7310-0.7360. Prefer to sell rallies.

(Source: Finlogix.com)

- USD/JPY – The Dollar was little changed against the Japanese Yen, settling at 110.44 from 110.42 yesterday. The rise in the US 10-year Treasury bond yield will keep this currency pair supported. Immediate support can be found at 110.30 (overnight low 110.32) followed by 110.00. Immediate resistance lies at 110.55 (overnight high 110.55) followed by 110.85. Look for consolidation in a likely range today between 110.30-110.80. Prefer to buy dips on USD/JPY today.

Happy Friday and trading all.