Canada dollar rise in focus! Notable event on August 29, 2018
◎ Today's notable events
8/29 (Wednesday)
15:00 EUR Germany Consumer Confidence Index
15:45 EUR France GDP
16:00 TRY Turkey Trade Balance
21:30 USD US GDP
21:30 CAD Canada Current Account
23:30 USD Crude Oil Inventories
8/30 (Thursday)
Turkey holiday (Victory Day)
02:00 USD 7-year Bond Auction
07:45 NZD Building Permits
10:30 AUD Building Permits
◎ Today's highlights
1) NAFTA talks and the Canadian dollar
Yesterday, statements regarding NAFTA renegotiation continued. Regarding Mexico, a bilateral agreement. Regarding Canada, there is information that an agreement could be reached as soon as this week. It is also said that concessions from the US side were made. In response, the Canadian dollar rose sharply. CAD/JPY appears to have broken out of a triangular consolidation and started rising.
Canadian dollar surging! Is CAD/JPY breaking out of triangle?
2) Euro stronger than expected
The euro broke below two months of range, but instead of falling, reversed two weeks ago and surged, reaching the recent three-month high range. The euro faces many selling factors; why is it rising? Personally I think many selling factors are already priced in, and the dollar weakness is aiding it. Now, think about EUR/USD from here.
Background to euro rally and future euro outlook
3) European risk? Swiss franc strength
Yesterday, among major currencies, the strongest and weakest separated clearly. The strongest was the Swiss franc. Europe, especially Italy's fiscal issues caused concern, leading to Swiss franc demand I think. Italy's risk factors change daily, but here are points to watch.
European risk resurging? Safe-haven Swiss franc strength!
4) US GDP release
Today, US GDP is released. At the Jackson Hole Symposium last week, Chair Powell of the Fed indicated dovish remarks. The dollar has been weakening. This GDP release comes amid dollar weakness. Will the results reflect the remarks? Will it mark a turning point to an uptrend? This is worth watching.
5) Turkey-related
Since the week began, the lira has been gradually falling. Yesterday, a surprising headline emerged. According to WSJ, German government officials were considering financial support to Turkey. But can the public support be gained? Is financial support possible without IMF aid? This was the substance. Following this, the lira surged, then Bloomberg reported that it was not financial aid but other forms of support that would be provided. As a result, the lira retraced and then started to fall again. Given high attention, markets react strongly to headlines. Today also, headlines will be watched closely.
◎ Positions held and strategy
Hold CAD/JPY long and consider adding more.
EUR/USD has not broken above “1.1750, if it falters again, I would consider a short again. However, given month-end, I want to restraint from aggressive trading.
◎ Yesterday's recording room
8 major currency strength/weakness chart
Yesterday's key statements
Canada's Prime Minister Justin Trudeau
“Today I spoke with President Trump by phone about NAFTA negotiations”
“The talks were constructive and progress is welcome”
“We hope NAFTA negotiations succeed”
Italy's Deputy Prime Minister Di Maio (in an interview with Italian Fatto Quotidiano)
“If investment and reforms aimed at promoting economic growth are carried out, the deficit as a percentage of GDP could exceed EU standards of 3%”
Germany's Foreign Minister Maas
“If we can reach agreement on Ireland's border issue, all other unresolved issues can be solved”
“There should not be a hard border for Ireland”
“We must prepare for all scenarios regarding Brexit”
“It is unfortunate that hard Brexit (no deal) is still being considered”
“I oppose excluding Iran from the Swift system”
“We want to support companies that want to remain in Iran as much as possible”
“Europe plans to deepen relations with Asia this autumn”
“The US should rescind tariffs on trade and stop pressuring European automotive industry”
UK Prime Minister Theresa May
“Brexit won't be the end of the world even without a deal”
Germany's Foreign Minister Maas
“Germany does not want an disorderly Brexit and hopes an agreement can be reached”
ECB Executive Board member Fabio Panetta
“Be patient, cautious, and still need sustained policy”
Italy's Economy and Finance Minister Tria
“The Italian government does not plan deficits above the EU 3% of GDP”
U.S. Treasury Secretary Steven Mnuchin
“I expect no problems between the US and Canada”
“Trade with Canada is not expected to face major obstacles”
“Progress may come from President Juncker's visit to the US”
“We need better access to the Chinese market, not one-sided”
President of the Federal Reserve Bank of Minneapolis Neel Kashkari
“The US economy is good. The labor market remains solid”
US Commerce Secretary Wilbur Ross
“There was no breakthrough in the US-China trade talks last week”
“The US will not accuse Mexico of currency manipulation”
British Secretary of State for Foreign Affairs Freeland
“Constructive discussions with US Trade Representative Lighthizer”
“It was good that Mexico made concessions on labor and automotive origin rules”
