· The dollar stayed near a two-week high versus the yen on Friday as investors pared expectations for aggressive Federal Reserve interest rate cuts ahead of key U.S. economic data later in the day.
· The euro held gains after the European Central Bank (ECB) kept policy unchanged, disappointing some market participants who had bet on an easing, but sources told Reuters a rate cut at the ECB’s next meeting appeared certain.
· The dollar traded at 108.620 yen, near a two-week high of 108.755 yen. The greenback was on course for a weekly gain against the Japanese currency of 0.8%, which would be its biggest since the week ending April 5.
Against a basket of six major currencies, the dollar index was at 97.768 after reaching a two-month high of 98.173. The dollar index was up 0.7% on the week.
The euro traded at $1.1151, a mild recovery from a two-month low of $1.1102. However, the euro was down 0.6% this week.
· EUR/USD consolidates in mid-range after the ECB, ahead of US GDP
EUR/USD is trading around 1.1150, in the middle of the broad range that characterized after the ECB left policy unchanged but hinted upcoming stimulus. The focus now shifts to the US GDP which is projected to show a slowdown.
From a technical perspective, nothing seems to have changed much for the pair and the short-term bias remains tilted in favour of bearish traders. However, it will be prudent to wait for a sustained breakthrough the 1.1100 handle before positioning for any further near-term depreciating move towards 1.1070 intermediate support before the pair eventually drops to test the 1.1000 round figure mark in the near-term.
On the flip side, the 1.1185-90 region (the overnight swing high) - nearing the previous horizontal support break-point, now seems to act as an immediate resistance, above which the pair seems all set to aim back towards testing the 1.1270-80 heavy supply zone – nearing 100-day EMA.
· The Bureau of Economic Analysis a division of the Commerce Department will issue its first estimate for annualized gross domestic product for the first quarter at 8:30 EDT, 12:30 GMT on Friday July 26th. This is the first of three estimates.
Forecast
US annualized GDP is expected to decrease to 1.8% in the second quarter from 3.1% in the first three months of the year and 2.2% in the final quarter of 2018. The range of estimates in the Reuters Survey of economists is 1.1% to 2.9%.
Business sentiment is at a low ebb of the past three years. The manufacturing purchasing managers survey registered 51.7 in June, the weakest it has been since the 2016 election. The index for new orders just skirted contraction in June at 50 and that is the poorest since December 2015.
Conclusion
The American consumer economy is healthy but business sentiment has struck its lowest level of the past three years. Concerns over global growth, trade disputes and Brexit have cut into the willingness of business to spend for future consumption. Even the robust US economy is not enough to replace global consumption for many US firms that generate large amounts of sales in foreign markets
· The U.S. government will pay American farmers hurt by the trade war with China between $15 and $150 per acre in an aid package totaling $16 billion, officials said on Thursday, with farmers in the South poised to see higher rates than in the Midwest.
The assistance, starting in mid-to-late August, follows Republican President Donald Trump’s $12 billion package last year that was aimed at making up for lower farm good prices and lost sales.
· The Federal Reserve will cut interest rates next week and again later this year, but the U.S. central bank is not entering an extended cycle of easing monetary policy, according to economists surveyed by Bloomberg.
“If the Fed is successful it will hike rates again before the next recession,” said Constance Hunter, chief economist at KPMG LLP, in her survey response.
· Boris Johnson promised on Thursday that Brexit would make Britain the greatest place on earth, echoing the patriotic rhetoric of U.S. President Donald Trump in his first speech to parliament as prime minister.
Johnson, who was hailed by the U.S. president as Britain’s Trump, has promised to strike a new divorce deal with the European Union and to energize the world’s fifth-largest economy after what he casts as the gloom of Theresa May’s premiership.
French President Emmanuel Macron will discuss Brexit with Britain’s new Prime Minister Boris Johnson, whom he has invited to visit in the next few weeks, an official from Macron’s Elysee office said on Friday.
· Japan is preparing for cabinet approval as early as Aug. 2 to remove South Korea from the so-called white list status with minimum trade restrictions, Kyodo news agency reported on Friday.
Once the removal is officially announced, the change would take effect after 21 days, Kyodo said.
The period for canvassing public opinion in Japan ended on Wednesday. South Korea has protested the Japanese plan, saying it would undermine their decades-old economic and security cooperation and threaten free trade.
There are currently 27 countries on Japan’s white list including Germany, Britain and the United States.
· Japanese Economy Minister Toshimitsu Motegi is making preparations to meet with U.S. Trade Representative Robert Lighthizer in Washington on Aug. 1 for ministerial-level trade talks, two sources familiar with the matter said.
U.S. President Donald Trump has pressured Tokyo to speed up talks for a two-way trade deal that would open up Japan’s market for U.S. goods, particularly in areas of agriculture, and fix what he sees as a huge bilateral trade imbalance.
· Oil prices edged higher on Friday on worries about Middle East tensions, though a flagging global economic growth outlook amid the U.S.-China trade war capped gains.
Brent crude futures LCOc1 were up 25 cents, or 0.4%, at $63.64 a barrel by 0651 GMT. They rose 0.3% in the previous session.
U.S. West Texas Intermediate crude CLc1 was 36 cents higher, or 0.6%, at $56.20 a barrel, after gaining 0.25% overnight.
Reference: Reuters, CNBC, FX Street
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