Risk sentiment sputters
Risk markets are mixed to start the day. An air of optimism still persists that US and Canada will come to terms before tomorrow's Trump imposed a deadline but concerns about the ongoing China/US trade war remain.
Currency Markets
Canadian Dollar
Canada's Q2 GDP has missed the mark marginally, disappointing investors. It's still a substantial number by any standard, so the question is to trade or fade.
The slowdown in business investment is what sticks out, and the real question is will this be enough to derail the Bank of Canada. I think the storyline is simple, ratify a trade deal and the loonie trades in the 1.28 handle.
The broad DXY is unchanged, but of course, the market is searching for the next big trade, the antipodeans are looking oh so shaky.
New Zealand Dollar
ANZ August business confidence index hit its lowest point in the last ten years and with the RBNZ chiming in:
It seems increasingly inevitable that wariness among firms will have real impacts, in the near term at least, as an investment and employment decisions are deferred
Sending the Kiwi tumbling. While we should accept further pressure in the NZDUSD, the next big trade could be the downside test of the Australian Dollar.
Housing market concerns and political turbulence should keep the pressure on the Aussie.
Westpac (AX:WBC) adjusting their variable mortgage rates higher due to funding costs abrading margins does raise the spectre of mortgage defaults, and one would assume the RBA.
We're certainly on the edge of a slippery slope amid this bearish Aussie backdrop with a brewing political hotpot threatening a cherished AAA sovereign rating, but the RBA will ultimately struggle to hold their neutral tilt should any signs of housing meltdown materialise.
Equity markets
Equities are generally weaker across the globe as indices pause for air after a solid run this week. The Nikkei managed to finish the day unchanged, but China shares closed lower noticeably lower as USD/CNH convincingly bounced off the USDCNH 6.80 level while broader risk sentiment sputtered.
Oil Markets
WTI continues pushing higher on the back of the EIA weekly inventory report, which showed US stocks declining by more than expected. While WTI is holding onto earlier gains after yesterday, DoE inspired move, but the primary bullish factor remains rooted in Iran sanctions.
Gold Markets
Gold remains precariously perched above $1200 However, in the absence of any significant catalysts and with the Fed committed to status quo normalisation, real yields moving higher, and equities continue to soar, who wants gold?? All of which suggests topside moves will continue to be faded.
Disclaimer: This article is for general information purposes only. It is not investment advice, an inducement to trade, or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Ensure you fully understand all of the risks involved and seek independent advice if necessary. Losses can exceed investment.