FX market outlookPosted on Thursday, August 3 2017 at 8:13 am GMT+0000
Markets have been relatively quiet during the Asian session with only a couple of notable economic data releases, which haven’t caused significant moves in the forex market. Looking ahead, the key event of the day will be Bank of England Governor Mark Carney’s speech and the central bank’s decision on interest rates.
Out of Asia, China’s Caixin services PMI and Australia’s balance of trade were the two main economic releases. The services PMI inched down to 51.5 in July from 51.6 the prior month and slightly below the expected level of 51.9. The balance of trade for the continent down under shrank to A$0.9 billion in June, much below expectations of A$1.8 billion and well below the downwardly revised figure for May, which stood at A$2.0 billion. The aussie lost about 40-pips against its US counterpart during the day to last trade at $0.7924.
The dollar was broadly steady against the yen during the first session of the day. The pair last traded at 110.61, and the dollar index was up 0.12% at 92.95. The non-farm payrolls report that will be released on Friday will be closely watched by dollar traders. In the mean time, President Trump is keeping everyone on their tip-toes with yet another political concern. According to a government official who spoke on condition of anonymity, Trump’s administration is preparing to investigate potential violations of intellectual property by China. If the probe goes ahead it will be the latest of several that could degrade ties between the world’s two largest economies and furthermore impact the overall global trade. This comes after US Congress approved a bill that puts sanctions against Russia, Iran and North Korea. President Trump reluctantly signed the bill last night.
During the European session, the Bank of England’s Monetary Policy Committee meeting and speech by BOE Governor Mark Carney could be of most interest. While markets are not expecting a hike in interest rates, traders will be looking out for a hawkish tone in Mark Carney’s speech. Should the BOE Governor indicate a tightening of monetary policy in the near future, sterling could react significantly. Pound/dollar was last moderately up, trading at 1.3231.
The euro eased 0.10%, slipping from yesterday’s intra-day high of 1.1909, which it last achieved in January 2015. Euro/dollar was last trading at 1.1845.
Oil prices were under pressure today following the EIA weekly report that showed oil inventories falling at a slower pace than expected and less than the prior week’s reduction. The EIA report follows the API figures that signaled a build in crude inventories. WTI was last trading at $49.31 a barrel while Brent was at $52.06.
Gold was also under pressure today, with the precious metal last trading at $1,262.42 an ounce.