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By xemarketanalysis August 31, 2018 11:01 am
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    XE Market Analysis: Currencies Sailing between Scylla and Charybdis as August Ends

    OVERVIEW

    • Trade tensions are turning sentiment in a defensive mode; World equity markets in the red.

    • Markets remain optimistic but cautious on “enhanced” NAFTA 2.

    • Gold adds nearly $4.50 to shine at $1,205 and WTI down on trade fears

    HIGHLIGHT

    The INR is closing the month as the worst performer among its Asian counterparts, losing 3.45% versus the greenback. USD/INR touched a new all-time high at 71.00 this morning. Month-end demand, widening trade deficit and rising crude oil prices are weighing on the currency. Recent EM turmoil has also led to massive capital flight. Foreign investors pulled a reported $9 billion out of INR assets between April and June.

    US DOLLAR

    The month is coming to an end with markets under high stress from global trade tensions. Currency flows pushed safe-haven currencies, JPY and CHF, higher to the top versus their G-10 peers. World equity indices are flashing red. The US Administration still believes trade tariff is the new genie in a bottle and is considering to slap a new tax on approximately $200 billion worth of Chinese products. Investor sentiment is turning defensive. With no significant economic data for release during the NA session today we expect the markets to sail between Scylla the Charybdis going into the long weekend.

    BRITISH POUND

    The Sterling is trading with a negative tone. Investors reduced their bets ahead of the meeting between UK’s Raab and the EU’s Barnier. The focus once again is on the UK’s departure from EU. The Pound enjoyed a brief moment of joy after Barnier pointed out that the EU is set to propose a “deal like no other country” to the UK. The proof of the pudding is in the eating and market remains cautious.

    EURO

    EUR/USD is leaning lower towards the mid-1.600s amidst turmoil in Emerging markets and speculation that the US will impose massive tariffs on China by next week. Investors ignored the Euro-zone unemployment rate which remained stable at 8.2% last month. It remains the lowest recorded rate since November 2008. CPI Flash estimate meanwhile missed expectations at 2.0% in August, down from 2.1% in July. 

    CANADIAN DOLLAR

    USD/CAD is consolidating around the psychological 1.30 level and the market is closely waiting for new development on the “enhanced” NAFTA deal. Twitter feeds from the White House was quiet, so it must mean a “big deal” is not cooked yet. Fear of escalating global trade wars has put a dent on the Loonie and oil futures prices. WTI is down 0.7% failing to breach the $70.50 barrier.

    AUSTRALIAN DOLLAR

    The Australian Dollar took a tumble after former PM Turnbull announced that he is quitting the parliament. The news hit the AUD, sending the AUD/USD is down 0.5%, and is now trading near one-year low. The exit leaves the ruling government into tight political chaos. Meanwhile, new trade tensions between China and the US are expected to put the currency under more pressure.

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