Forex news for NY trading on August 22, 2018

In other markets:

  • Spot gold is trading near unchanged at $1196.00. The high reached $1201.91. The low extended to $1192.60
  • WTI crude oil futures are trading up $2.05 or 3.11% at $67.90. The index is trading below the 100 day MA at $68.42 but above the 200 day MA at $64.43. The high today got within $0.34 of the 100 day MA today but backed off. CLICK HERE

Stocks in the US ended the day mixed with gains in the tech heavy Nasdaq, but declines in the Dow 30 big cap stocks. The S&P index was also lower by a small amount.

In Europe, stocks were mostly higher but rises were modest. Below are the % changes and high/lows:

In the US debt markets today, yields are ending the session with modest declines and the 2-10 spread contracted to 22.77 bps. That is in about 0.7 bps on the day.

European 10 year yields ending the session higher:

Fundamentally today,

  • Existing home sales in July came in at the lowest level in 2 1/2 years at 5.34M vs 5.4M expected. The decline was the 4th straight decline. That has not been done since 2013. Sales are down -1.5% on the year. Low supply, higher prices and higher rates are pricing new buyers out of the market. Tariffs on things like lumber from Canada, are not a help
  • Oil inventories for the current week saw a greater than expected fall of -5836K vs -2000K expected. The Gasoline inventories were higher at 1200K vs 1050K but it could not stop crude oil prices from rising over 3% in trading today.
  • Sarah Sanders said that President and the Fed Chair Powell have not met in person since he took on the role of the Fed Chair, and he has not talked to Powell directly about the rate rises.

The FOMC meeting minutes were also released in the NY afternoon session and although the Fed said they generally expected further gradual hikes and that there was considerable momentum in household and business spending, they warned that GDP growth would slow in second half of the year and that most participants said escalation of trade disputes was a potentially consequential downside risk for US economy.

The Fed also said that many participants noted it would likely be appropriate in the 'not-too-distant future' to no longer refer to the monetary policy stance as accommodative. In other words the Fed was close to rate neutrality.

The impact on the forex rates saw a dollar decline, then followed by a dollar rally back to the start point and some leveling off into the close. Overall, the reaction saw the dollar move a bit lower in the NY afternoon session. I don't think the Fed minutes were necessarily a big surprise as they are more transparent and steady with their approach. A December hike is still in the air for now.

Finally in other news, there was a lot of rumblings about NAFTA talks coming to an end shortly. I should say, the US/Mexican NAFTA talks. In reality a NAFTA decision would need to have Canada's approval. Canada has been on the outside looking in as trade negotiators thought that doing US/Mexico first and then working in Canada would be a better way to proceed.

The CAD seemed to get encouragement from the headlines - with higher oil helping out - as it is ending the session as the strongest currency of the day. The JPY is the weakest. The USD is ending mostly lower with gains vs the JPY and the AUD.