Over the past few weeks the action in financial markets was astounding—a historic understatement. The US Dollar rebound has countered the Greenback’s bearish trend, responding sharply to recent economic news. Traders are still searching high and low to understand the meaning of President Donald Trump’s latest tariff proclamations. A parallel trend, likely not coincidentally, is the expansion of monetary policy expectations among global central banks.
Cuts from the European Central Bank (ECB). This decision has shocked the world, leading many to speculate about what it means for the euro and the markets’ reaction as a whole. We think the Bank of Canada (BoC) will stand pat. It can decide to hit the brakes on any new rate increase this round. On Monday during Asian trading, the Australian Dollar (AUD) showed a considerable amount of strength versus the US Dollar (USD). It traded just above the 0.6300 level with optimism pervading the new week of trading.
Market participants noted that the AUD/USD pair opened the week on a positive note, buoyed by various factors including expectations surrounding the Federal Reserve and Bank of Japan policy divergences. These expectations are fueling the rally in the Japanese Yen, though pressure still exists on the AUD/USD currency pair.
U.S. retail sales numbers will steal the show. These new figures will provide valuable insights into consumer spending trends, before other key economic indicators start coming out. CPI data is still poised to steal the show. Releases are on their way from the United Kingdom, Canada, New Zealand and Japan.
Additionally, the still raging trade war with China remains an uncertainty weighing heavily on the market. While there have been notable gains against individual counterparts, on a broad basis the gains continue to be fleeting, with traders continuing to lack conviction. The USD/JPY currency pair is headed up in Japan. It’s closing its losses and getting back above the 143.00 mark in today’s (Monday’s) Asian trading session.
Gold prices, too, are showing signs of panic, pulling back from an intraday all-time high of $3,245. The precious metal’s recent volatility is a reflection of the ongoing tussle between risk appetite and safe-haven demand in an environment of mixed economic signals.