The China/US trade talks ended, and details are scarce. Chinese President Xi Jinping said there is progress on important issues and US Trade Representative Lighthizer and Treasury Secretary Mnuchin echoed his remarks. But they added, “there is much work to do.” They also agreed to continue the talks next week.
Traders were expecting something more substantial which seemed to have a bigger impact on FX rather than equities. Asia equity indices closed in the red, but China data played a large role in the selling. European bourses are higher, and US equity futures point to a higher open on Wall Street.
FX markets opened mixed. CAD, Kiwi and GBP are modestly higher, EUR and CHF are a tad softer, and AUD and JPY are flat. Weaker than expected China inflation data (Jan CPI Actual 1.7% vs forecast 1.9%) sent the antipodeans lower, but just briefly. USDJPY dipped in line with a fall in 10 year US Treasury yields to 2.645% but reversed the move when yields bounced back to 2.667% at the New York open.
EURUSD is trading at the bottom of its 1.1269-96 range. It is supported by the lingering impact of yesterday’s weak US data but undermined a tad by the snap election call in Spain and a small drop in the eurozone trade surplus.
Sterling is at the top of its range 1.2786-1.2828 range. Traders dismissed the latest UK Brexit drama and bought the GBPUSD after UK January Retail Sales exceed forecasts. (Actual 1.0% vs forecast 0.2% m/m) Profit taking ahead of the weekend may have also been a factor.
Oil prices continued their march higher. WTI touched $54.98 before easing back to $54.74. Prices are supported by Saudi production cuts and hopes for a US/China trade deal sparking fresh demand.
USDCAD failed to rally after yesterday’s weaker than expected US Retail Sales data. Instead, it soared to 1.3337 from its opening level of 1.3267 after a sharply weaker Canadian Manufacturing shipments report. Falling WTI prices contributed to the loss. Almost all is forgiven this morning. USDCAD drifted lower throughout the overnight session although there seems to be plenty of buyers on dips due to bullish technicals.
President Trump is reportedly going to sign the latest appropriations bill and keep the US government open but is just drawing out the process to continue to bask in the spotlight. He still as brick stuck in his craw about the Mexico wall and is rumoured to be planning a National Emergency announcement to get funding. President Trump is expected to give a speech at 10:00 am EST.
Today’s US data calendar includes Capacity Utilization, Industrial Production and Michigan Consumer Sentiment. The Canadian data is third-tier and not a factor for FX traders.
The intraday USDCAD technicals are bullish. Yesterday’s move above 1.3295 snapped the downtrend line from January 31 and the uptrend line from January 28 is intact while prices are above 1.3230. However, USDCAD needs to chop through resistance in the 1.3340-80 area to put an end to the two week 1.3070-1.3370 trading range. Failure to do so, means more of the same. For today, USDCAD support is at 1.3270 and 1.3230. Resistance is at 1.3330 and 1.3370. and 1.3330. Today’s Range 1.3270-1.3350 so-spacer