Euro tumbles on talk Italy to delay budget meeting

EUR/USD drops below 1.17

News that Italy may delay its 2019 budget discussion meeting sent shivers through the Euro, with EUR/USD falling as much as 0.43% to sub-1.17 levels for the first time in five days. The pair is now drifting lower after the initial drop, and is heading toward the 100-day moving average, which is sitting at 1.1657. EUR/USD is currently at 1.1698.

EUR/USD Daily Chart

Source: Oanda fxTrade

NOTE: EUR1.28 billion of EUR/USD put options expire today at strike 1.1750

Dollar pushes higher as Fed stays the course

After a bit of a delay, Asian traders latched on to the hawkish implications of the Fed statement after they hiked rates at the FOMC meeting.  The value of the dollar, as measured against a basket of six currencies, rose 0.39% in Asia trading following a slight dip toward the NY close.

As it always does, the Hong Kong Monetary Authority also hiked rates by 25bps, while the Reserve Bank of New Zealand, perhaps the most dovish central bank globally, left rates unchanged. NZD/USD traded steady after the meeting but succumbed to the dollar’s rise later on. The pair is currently sitting at 0.6642, just above the 200-hour moving average at 0.6636.

NZD/USD Hourly Chart

Source: Oanda fxTrade

Mixed results on trade negotiations

Early in the Asian session there was some positive news on the trade war front, though the reaction proved to be fleeting US President Trump had said that he intended to call Chinese President Xi sometime today to talk about tariffs. The initial reaction was positive, though this was swallowed up by the US dollar developments. Meanwhile, Trump tweeted yesterday that the China tariffs were having no impact on the US economy.

Still in Asia, the US and Japan are to sit down for trade talks following Trump’s meeting with Abe.  The good news for Japanese auto makers was that the US agreed to hold off on further auto tariffs while the talks continue.

In other trade negotiations, NAFTA discussions appear to be going nowhere. Trump said he rejected a one-on-one meeting with PM Trudeau while informing Congress that moving NAFTA forward without Canada was part of a broader trade initiative. He added that he “disliked” talking to Canada’s negotiators and threatened to tax Canadian autos if no deal was struck. USD/CAD has risen 1.15% over the past five days as talks stalled, and is currently testing the 100- and 55-day moving averages in the 1.3053-1.3059 window, respectively.

USD/CAD Daily Chart

Source: Oanda fxTrade

Higher German CPI could support the Euro

Consumer prices in Germany for September are expected to maintain the same pace of increase as August, according to the latest survey of economists. CPI seen rising 0.1% m/m and 2% y/y and a figure higher than this could confirm Draghi’s comments earlier this week about price pressures in the economy and force a revision of the ECB rate outlook, which in turn could help the Euro.

The US data slate includes the final reading for Q2 GDP (no revision expected from the +4.2% y/y previously recorded) along with the goods trade balance for August. This is expected to show the first narrowing of the deficit in three months, and no doubt would be music to Donald Trump’s ears. The rest of the calendar is populated with Q2 PCE prices and August durable goods orders.

The full MarketPulse data calendar is available at https://www.marketpulse.com/economic-events/

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