Dollar holds gains as G-20 doldrums set in

Dollar underpinned in quiet trading

The US dollar held on to yesterday’s gains in quiet, tight-ranged trading with the market already having one eye on this weekend’s G-20 meeting. As long as Trump’s threats of extending US tariffs to the next phase are in place, it’s likely that this scenario will continue into the weekend.

USD/JPY touched its highest level in two weeks this morning, though EUR/USD managed to hold above yesterday’s lows. GBP remains under pressure from the uncertainty surrounding the Brexit parliamentary vote (though that’s not until December 11!), and the shaky environment is likely to persist through the debating sessions from December 7 onwards.

Sterling falls on Brexit vote worries, Trump weighs in

Equity markets fared a little better, with Asian markets mostly in the black, though US futures markets are currently pointing to a lower open on Wall Street.

Aussie ignores weak data

The Aussie remained firm despite data showing a contraction in construction work done in the third quarter. Work slowed 2.8% compared with expectations of 1.0% growth, which itself was a slowdown from Q2’s +1.6%. AUD/USD firmed 0.1% and is still holding above the 55-day moving average at 0.7183, as it has on a closing basis since October 31.

AUD/USD Daily Chart

Source: OANDA fxTrade

Fed takes Trump’s flak

US President Trump renewed his attack on the nation’s central bank, laying the blame for the recent stock market declines and GM’s decision to close plants in the US squarely on the hawkish policies pursued by Jerome Powell and his team at the Fed. He stated that he was “not even a little bit happy” with his choice of Fed chairman, though fell short of saying whether he would fire Powell.

The Fed is still on track to deliver its fourth rate hike this year on December 19, with market pricing suggesting a near-77% chance of a 25bps increase. The schedule for next year has recently become a bit more cloudy, with various Fed members cautioning about the potential headwinds facing the US economy. Be it slowing growth both home and overseas, or the trade dispute, there have been suggestions that the Fed could pause its hiking cycle as early as next spring.

Dinner for two, please

GDP revision on tap

The first revision of the US third quarter GDP is due today, but economists do not expected any changes to the first reading of +3.5% y/y, according to the latest survey. October’s trade balance is expected to show a widening of the deficit to $76.7 billion from $76.04 billion in September. Such an outcome would no doubt not be pleasing to Mr Trump’s ears, and could strengthen his resolve while negotiating the trade dispute this weekend. New home sales will give us a taste of the strength of the housing market but the highlight for the US calendar will be a speech by Fed chairman Powell.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

Live FX analysis – 27 November 2018 (video)

Source: MarketPulse

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