Trade Talks Keep the USD in Focus

Daily Update - 30th August 2018

Yesterday’s Focus

• USD Gross Domestic Product Annualized Q2,  Personal Consumption Expenditure Q2, Pending Home Sales
• EUR Gfk Consumer Confidence Survey

Yesterday’s Explained

The Euro was little changed against dollar on Wednesday as lingering China-U.S. trade tensions continued to weigh on the market.

The dollar was stuck in a tight range on Wednesday after touching a four-week low overnight as optimism over the U.S.-Mexico trade deal gave way to caution ahead of an upcoming deadline in the Sino-U.S. trade dispute.

The deadline for public comment on U.S. President Donald Trump's tariffs on another $200 billion of Chinese goods is on Sept. 5, with the new measures possibly taking effect next month.

On the data front, U.S. economic growth was a bit stronger than initially thought in the second quarter, notching its best performance in nearly four years. Gross domestic product grew at a 4.2 percent annualized rate, the Commerce Department data showed in its second estimate of GDP growth for the second quarter. That was slightly up from the 4.1 percent pace of expansion reported in July. The data cemented expectations for a U.S. rate hike next month

Sterling rose sharply against the dollar on Wednesday after Michel Barnier said the bloc was prepared to offer Britain an unprecedentedly close relationship after it quits the EU, but it would not permit anything that weakened the body's single market. His comments offered some relief to battered sterling bulls who have started pricing in the prospect of a no-deal Brexit in recent days, especially via the currency derivatives markets.

Britain could choose to withhold some payments to the European Union if a deal to ease its exit from the bloc is not reached before it leaves in March, Brexit minister Dominic Raab told legislators on Wednesday. 

 

Today’s Focus

• EUR Unemployment Rate, Harmonized Index of Consumer Prices
• USD Personal Consumption Expenditure,  Jobless Claim Reports

For the EUR, economic data out of the Eurozone includes prelim August inflation figures out of Spain and Germany, along with the all-important August unemployment numbers also scheduled for release out of Germany.While concerns over a prolonged trade war and ramifications for the Eurozone and global economies have tempered sentiment towards ECB monetary policy, the week’s conclusion and agreement between the U.S and Mexico and progress between the U.S and Canada may ease concerns of an economic meltdown and a need for the ECB to reverse its stance on policy.The upside through the week could be under pressure should today’s stats disappoint, the key driver being Germany’s unemployment change numbers, though expect inflation figures to also influence.

For the Pound, it’s another quiet day ahead on the data front, leaving the Pound in the hands of Brexit chatter.

Across the Pond, economic data out of the U.S includes the weekly jobless claims and July personal spending figures, with the FED’s preferred Core PCE Price Index numbers for August also scheduled for release.While we can expect some influence from the personal spending numbers, the inflation figures will likely be the main driver for the Dollar, anything in line with or better than forecasted being Dollar positive.