Forexlive Americas FX news wrap: Consumer remains confident, but bond traders are not
Forex news for NY trading on August 27, 2019
- Stocks could not keep the momentum going in the last hour. End lower on the day
- Oil - heads up for the inventory data due around the bottom of the hour
- Crude oil futures end with sharp gains. Settle at $54.93.
- UK PM Johnson: Had positive and substantive conversation with EU Juncker
- US 30-year yield falls below 3-month Treasury bill yield for first time in 12 years
- EU Juncker: he would look at any concrete proposals PM Johnson may have...
- Pres. Trump back to criticizing the Fed
- China's Global Times: China driven internally. Getting difficult for US to press China
- Irish FM Coveney: Alternative arrangements being discussed do not do same as the backstop
- European equity close: Solid gains outside the UK
- US 2s10s falls definitively into negative territory on long-end led flattener
- UK govt spokesman: Working to find creative solutions to Irish border
- Dallas Fed August services sector outlook index +0.2 vs +4.7 prior
- Richmond Fed manufacturing index for August 1 versus -2 estimate
- US August consumer confidence 135.1 vs 129.0 expected
- The Bank of Canada is a tough central bank to handicap
- ECB's De Guindos says central bank 'has to act with determination'
- US FHFA house price index for the month of June 0.2% vs 0.2% estimate
- US June Case-Shiller 20-city house price index 2.13% y/y vs +2.3% expected
- Fmr New York Fed President Dudley: Fed should stop enabling Trump
- The GBP is the strongest and the NZD is the weakest as NA traders enter for the day
In other markets:
- Spot gold is up $15.38 or 1% at $1542.48
- WTI crude oil futures are up $1.80 or 3.34% at $55.44
Today saw the US consumer confidence remain upbeat in the US with a reading of 135.1. That may have been lower than the lofty 135.8 last month, but well above the estimate of 129.0. The present situation moved to 177.2 from 170.9 last month. Although the expectations fell to 107.0 from 112.4, it is still relatively high and given all the trade uncertainty and global issues, it is not surprising there is a dip. Overall, however, with the consumer representing 65-70% of the US economy, it seems recession fear are overblown.
That is the good news. The not so good news today is that the bond traders don't seem to believe it. Yields moved sharply lower once again with the yield curve inverting more. The 2-10 spread is at negative -4.62 bps and the 3 month to 30 year spread went inverted as well.
Although there are other circumstances (like lower global yields) that are leading to a global shift lower in US rates too, the inverted yield curve IS saying recession is coming. How this all works out is anyone's guess, but the data and the markets are still a confused.
US stock indices today showed it's confusion as well. After opening higher, the indices moved lower as the yields moved lower and lower. Those losses were reversed with stocks clawing back toward unchanged with an hour to go. However, momentum stalled again and the indices moved lower into the close. Up and down, up and down. European shared closed mostly higher today.
In other markets,
- Spot gold rose $15 on the day to $1543. It voted in favor of risk off/fear
- WTI crude oil surged $2 or 3.82% at $55.69 in late trading. A larger than expected draw from the private data are helping over the last 30 or so minutes of the day. That action is in favor of a strong economy.
In the forex, the GBP is ending with the GBP the strongest. PM Johnson spoke with EU Juncker and went with new ideas. I can't say that there was any compromise, but the GBP was encouraged (or the price action showed that). The JPY was also stronger on the day. That is indicative of "risk off' flows.
The NZD the weakest. The CAD and AUD were also weak ("risk off"). CAD was weaker despite surging oil
Technicals for some pairs.
- The EURUSD traded in a 29 pip range today but is closing below the 1.1100 level. Close risk is a move above that level with more conservative risk for bears at 1.1113. The buyers had their shot to go higher with the surge higher on Friday, but the price action on Monday and today has taken a lot of wind out of the bulls sails.
- The GBPUSD stayed above its 100 hour MA in the Asian session and moved up from there. The 1.23077 level is home to the 38.2% of the move down from the June 2019 high. The high today reached 1.2309 before moving lower. The pair is trading down at 1.2288 into the close. Traders in the new day will need to get above the 1.23077 (and stay above) if this pair is to continue the run up. A move below the 1.2272 level would weaken the technical picture.
- The USDJPY stalled a topside trend line at the highs on the hourly chart today (and just below the falling 100 hour MA too (at 106.05 now). On the downside, the price fell to 105.584. That is the midpoint of the move down from last week's highs to Monday's low. We trader closer to the low target at 105.73 at the close. Traders will need to see a break below the 105.584 level.