Forex news for North American trade on September 12, 2018:
- US proposing new round of trade talks with China - report
- US PPI MoM for Aug -0.1% vs. 0.2% expected. YoY 2.8% vs. 3.2% expected
- Beige Book: Economy expanded at moderate pace. Trade worries rising
- NAFTA: Most-optimistic scenario is for deal in principle next week - source
- Fed's Brainard: Gradual interest rate increases are likely to be appropriate
- Trudeau repeats that a bad NAFTA deal is worse than no NAFTA deal
- Mexican NAFTA negotiator Smith Ramos on his way to DC
- US weekly EIA oil inventories -5296K vs -2000K expected
- Guajardo: Sees a 'high chance' of a US-Canada trade deal
- Fed's Bullard: US interest rates are neutral to restrictive
- Canada August Teranet house price index +1.4% vs +1.8% y/y expected
- Canada Q2 capacity utilization 85.5% vs 86.9% expected
Markets:
- Gold up $7 to $1206
- WTI crude up 98-cents to $70.22
- S&P 500 up 2 points to 2889
- US 10-year yields down 1 bps to 2.96%
- AUD leads, USD lags
It's the same theme day after day: the data nudges the market and then trade headlines jolt it. US PPI was soft and that led to some US dollar selling in the early going but later headlines about US-China talks briefly stole the show and NAFTA optimism hurt USD/CAD.
EUR/USD shook off a report about the ECB downgrading forecasts, which was impressive and EUR/USD eventually hit 1.1650 from a low of 1.1575. Then it retraced back to 1.1630 where it finished.
USD/JPY was stubbornly sold. The selling accelerated down to 111.25 after PPI from 111.45 but it rebounded on the China talk. One caveat in the story was that it's being led by Mnuchin and he's seen as a lone China dove in a sea of China hawks at the White House with the thinking that he will be eventually ignored. USD/JPY slid down to 111.12 on a late run on stops before bouncing back to 111.25.
Cable took advantage of some USD selling ahead of the BOE tomorrow. The consistent dollar selling may have been a symptom of position squaring ahead of the two big central bank meetings Thursday and maybe even the Aussie jobs report in the hours ahead.
Speaking of AUD/USD, it was the biggest beneficiary of the China report as it jumped to 0.7175 from 0.7130 and held onto the gains. Similar story in kiwi with a climb to 0.6565 from 0.6540.
USD/CAD fell on upbeat comments from Mexico's Guajardo who said he sees a high chance of a deal. He also said the chief Mexican negotiator was heading to Washington. The pair fell to a low of 1.2981 from 1.3070.
