1-888-998-3948


Tuesday, May 7, 2019

European Commission chops Germany's 2019 growth forecast in half

European Commission chops Germany's 2019 growth forecast in half
Source: Powered by Exchange Bank of Canada – www.ebcfx.com/news

Summary

  • USDCAD: Dollar/CAD indeed filled its Sunday opening gap yesterday and all it took was for global stock markets to calm down following Trump’s threat to raise tariffs on China this Friday.  The sense we got from listening to market banter yesterday was that Trump was bluffing and that this should not be surprising knowing how he negotiates.  Trade Representative Lighthizer and Treasury Secretary Mnuchin, however, affirmed after the close that Washington would indeed impose additional tariffs on Beijing this Friday, claiming that China had reneged on its commitments.  This saw the S&P futures give up half of yesterday’s bounce in early Asian trade and this helped stem the selling for USDCAD temporarily.  The AUDUSD rally following the dovish hold on interest rates from the Reserve Bank of Australia then appeared to be the catalyst for USDCAD to probe lower again, this time to familiar trend-line support in the 1.3420s.  China’s Commerce Ministry then announced that Vice Premier Liu would indeed travel to the US this Thursday, and while this erased most of the Lighthizer/Mnuchin decline, a healthy dose of skepticism has now swept over global markets as traders doubt one day of negotiations will be enough to thwart off an increase in China tariffs.  The European Commission is also adding to the “risk-off” feel to markets this morning after it slashed in half its 2019 GDP growth forecast for Germany.  The S&P futures are now trading back towards their session lows; June crude oil prices are following suit, and we’re seeing broad demand for the safe haven USD and JPY as NY trading gets underway today.  We think USDCAD may consolidate its early European session rally this morning, but we think the chart technicals look a whole lot better compared to this time yesterday.

  • EURUSD: Euro/dollar is trading on the defensive this morning as a multitude of factors sour the mood.  First, Germany reported weaker than expected Factory Order data for the month of March (+0.6% MoM vs +1.5%).  This appeared to thwart trader attempts to surpass chart resistance at 1.1220, and EURUSD then started to come off when the S&P futures started to fade the Vice Premier Lui He headlines.  The European Commission’s latest GDP forecasts (that came out just shy of the 8amET hour) appear to be catalyst for another wave of EUR selling here, as everybody seems focused on Germany’s 2019 growth now being chopped down to just +0.5% vs +1.1% previously.  Dollar/yuan is trading steady today, and it has yet to fill its Sunday opening gap higher.  Over 1.1blnEUR in options expire at the 1.1150 strike in EURUSD this morning, and so we think the market could remain under a bit of pressure here.

  • GBPUSD: Sterling has been following EURUSD for the most part in overnight trading; higher in Asia and early European trading, but now lower as a combination of US/China trade deal skepticism and lower German growth forecasts sour the global risk mood.  The Bank of England’s Cunliffe didn’t offer any clues on the UK monetary policy outlook when he spoke earlier today.  The BOE’s Haldene will be speaking today at 12:30pmET.  The EURGBP cross has broken back above the 0.8560 level (which was the level that opened a floodgate of GBP buying when it gave way on Friday).  We think this is technically positive for the cross, and should pressure GBPUSD further into chart support at 1.3025-45.

  • AUDUSD: The Reserve Bank of Australia decide to stand pat on interest rates last night, dashing the hopes for some of entrenched fund shorts in the marketplace that were expecting a cut.  In a rather dovish statement however, that featured a lot of revisions compared to the prior meeting, the RBA lowered its 2019 GDP forecast to 2.75% from 3.00% and lowered its inflation forecast to 1.75% from 2.00% previously.  Some think the decision to hold rates in light of a weaker outlook was politically motivated considering the Australian general election is just over a week away on May 18.  We would note the board’s continued focus on the strong Australian labour market, and its hope that this will eventually boost inflation.  AUDUSD shot immediately higher following the release but has since given back half of its gains as EURUSD selling picks up steam in NY trade so far this morning.  Chart support today comes at 0.6990-0.7000 (last night’s breakout point).

  • USDJPY: Dollar/yen is trading with a choppy, offered tone this morning as risk-off safe haven flows for JPY slightly outweigh broad demand for dollars.  The market’s Sunday opening gap remains partially unfilled (110.95-111.10) and so think of this as a natural target should we get a recovery in risk sentiment this week.  For the time being though, risk sentiment remains sour with the S&P futures now off almost 1% on the session.  The US 10-yr bond yield is now trading back below 2.50%.  We would not be surprised to see USDJPY re-test yesterday’s lows in the 110.30s, and this would put further stress on the entrenched fund long position.

Tune in @EBCTradeDesk for more real-time market coverage.

 

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

June Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Daily Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

EUR/GBP Daily Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

July Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

S&P 500 Daily Chart

Charts: TWS Workspace


About the Author

Erik Bregar

Erik Bregar - Director, FX Trading

linkedin twitter

Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan? Contact Us or call CXI's trading desk directly at 1-833-572-8933.

About Currency Exchange International
Currency Exchange International, CXI, is the leading provider of comprehensive foreign exchange services, risk management solutions and integrated international payments processing technology in North America. CXI’s relationship-driven approach ensures clients receive tailored solutions and world-class customer service. Through innovative and trusted FX software platforms, CXI delivers versatile foreign exchange services to our clients, so that they can efficiently manage and streamline their foreign currency and global payment needs. CXI is a trusted partner among financial institutions, corporations and retail markets around the world. To learn more, visit: www.ceifx.com

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.

This publication has been prepared by Currency Exchange International for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Currency Exchange International, its affiliates or any of their employees incur any responsibility. Neither Currency Exchange International nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Currency Exchange International products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Currency Exchange International.
Posted By Isabella Guevara at 06:46 AM
comments powered by Disqus

Platinum Passport

Travelers: Never miss a thing and be the first to know about CXI branch promotions, travel tips and hot trends.

Currency Insider

Corporations & Financial Institutions: Want to get ahead of the curve for the upcoming week? Get CXI's currency market trend analysis sent directly to your inbox weekly.