After a soft risk-off start, volatility picked up across the board on Wednesday, closing the week with a rather interesting price action. The Japanese Yen was one of the few currencies that lost ground against the Greenback; and considering the scarce economic data coming out of the country of the rising sun, we can only think of risk appetite and buoyant bullish momentum as causes. On the US Dollar front, some selling pressure took place in the first half of the week, due to a lessened demand on the safe haven on behalf of positive expectations regarding the ongoing trade negotiations between the 2 super powers, i.e., USA and China. However, such optimism could not hold grid when weaker-than-expected inflation figures hit the wires on Thursday, leading investors back to the US Dollar and its reserve status.
The major indices reported gains in the previous week. NASDAQ took the lead among US peers with a growth of 1.36%; the DOW JONES managed an increase of 0.92%. The Nikkei index was the biggest gainer of the week with an astonishing 3.53% plus.
On the daily chart, we can see price retracing over the past six weeks, and reaching the key support zone of 11900.8-11742.4.This level also happens to coincide with the lower band of the descending channel along with the 88.6% Fibonacci. Price is technically expected to recover back again to the upper side of this channel.
US Trade Representative Robert Lighthizer just finished a meeting with European Trade Commissioner Cecilia Malmstrom in Brussels yesterday. Malmstrom said in a tweet that “Lighthizer discussed how the EU-US achieves concrete results in the short to medium term towards a free trade agreement.” And they’ll meet again by the end of September.Lighthizer’s office described the talks as constructive. Additional work would be done in October to identify those tariff and non-tariff barriers that could be cut; a decisive meeting is expected in November, when both parties will most likely show final results. However, analysts do not predict treaty conclusions as soon as White House administration would like.
The common currency rose the first part of the previous week as wires hit easing concerns in relation to Italian debt. This followed after Italian Minister Giovanni Tria predicted on Monday that yields would drop as the government lays out its much-anticipated budget for 2019. Unlike past years, bond´s news have less power to set the pace for this currency in the long run, unless unexpected scenarios occurs.
The European Central Bank (ECB) captured all attention on Thursday when they decided to leave interest rates on hold in a widely anticipated decision; they also reiterated that rates will remain unchanged at least through the summer of 2019.
As announced at its June’s meeting, Mr. Draghi kept accommodative unwinding plans unchanged, as the asset purchase program is expected to end in December after halving it to €15 billion per month starting in October, from €30 billion at present.
Finally, the Union’s Central Bank changed its inflation forecast while leaving its growth prediction unaltered:
ECB growth forecasts:
2018 at 2% v. 2.1% in June
2019 at 1.8% v. 1.9% in June
2020 at 1.7% v. 1.7% in June
This data is due on Thursday. The Swiss National Bank has kept its policy consistent since the memorable day it lifted the peg below EUR/CHF, January 15th, 2015. Since then, it controls the Libor Rate at -0.75%, low into the negative region.
It also vowed to intervene as required to weaken the franc. With EUR/CHF lately nearing and reaching the 1.20 level, the SNB has not been engaged in the forex market for quite some time.
They are not foreseen to modify their policy in the forthcoming meeting. Still, they may commence arguing about an exit plan from the negative interest rate, a movement that could heighten the rate of the CHF.
Canadian Dollar- Inflation