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USD – United States Dollar
U.S. Consumer sentiment fell to a 7-month low in August on growing concerns surrounding a global slowdown, even as the domestic labor market data remains near record highs. The University of Michigan’s preliminary confidence index slumped to 92.1 from July’s 98.4, falling below all economist expectations. The director of the survey commented: “the main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehension about a possible recession.”
Federal Reserve Chair Powell’s speech was neutral as he did an excellent job of threading the needle between the hawks and the doves. A vital take away from Powell on behalf of the Fed was, “it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.” A neutral speech wasn’t enough to stop the market from continuing its selloff. The risk selloff only accelerated after Trump’s tweet, where he criticized the Fed for not cutting rates sooner. Calling Federal Reserve Chairman Jerome Powell and China’s President Xi enemies, he then and ordered American companies to start looking for alternatives to dealing with China. Late Friday, after the market close, he announced tariff increases from 25 percent to 30 percent on $250B of imports from October 1, and from 10 percent to 15 percent on remaining the $300B from September 1. U.S. equity markets closed around 3 percent down on Friday, with safe-haven currencies such as the Japanese Yen and Swiss Franc all rallying against E.M. currencies.
China’s on-shore currency, CNY, is falling towards another milestone amid its longest losing streak in more than two years. The Chinese yuan is currently sitting at 7.0955, and market watchers are waiting to see if the currency will weaken past its crucial next resistance of 7.1 per USD. The currency has depreciated in the last week to an 11-year low, which has been attributed to the trade war. Among the risk-off mode, the New Zealand Dollar has been remarkably resilient relative to other G10 currencies vs USD. It is making up for some under performance over the last few weeks since the central bank cut rates more than market expectations. RBNZ Governor Orr’s positive comments and a hint of no cut in September earlier on Friday helped keep an underlying bid tone. Keeping the Kiwi well anchored despite a large move higher in USDCNH.
EUR/USD: 1.1105 – 1.1167 ▼
GBP/USD: 1.2208 – 1.2289 ▼
USD/CAD: 1.3274 – 1.3321 ▼
AUD/USD: 0.6687 – 0.6770 ▲
NZD/USD: 0.6340 – 0.6404 ▲
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