Consumer Confidence and Trade Chatter to Drive the USD

Earlier in the Day:

It was another quiet day on the data front, with no material stats released through the Asian session this morning, leaving the markets to respond to Monday’s moves in the U.S and a continued shift in market risk appetite at the turn of the week.

An agreement reached between the U.S and Mexico on trade was the story of the day on Monday, spurring hopes of a near-term end to the ongoing trade war, though until the respective leaders of the world’s largest economies meet at the negotiating table, tit-for-tat may well continue, which would keep the markets on tender hooks going into the winter.

News of the U.S – Mexico trade deal and the risk on sentiment through the morning, reflected in the Asian equity market response to the record closes in the U.S on Monday, led the Japanese Yen into the red against the U.S Dollar, the Yen down 0.21% to ¥111.31 at the time of writing.

Elsewhere, the Aussie Dollar and Kiwi Dollar were also in the red, the Aussie Dollar down 0.23% to $0.7334 at the time of writing, while the Kiwi Dollar was down just 0.06% to $0.6691, the moves through the early part of the day coming off the back of solid gains on Monday.

For the Aussie Dollar, easing geo-political risks continues to be a positive, though how the U.S and China spat over trade in the coming weeks and whether economic indicators weaken further will likely influence, with China’s August manufacturing PMI due out on Friday likely to be watched closely.

A shift in sentiment towards FED monetary policy has certainly eased talks of the Aussie Dollar sliding to sub-$0.70 levels for now, though the pendulum could swing back in favour of the U.S Dollar should U.S economic indicators for the 3^rd quarter begin recovering.

In the equity markets, it was a mixed bag, with the CSI300 down 0.30% at the time of writing, while the Nikkei, Hang Seng and ASX200 enjoyed another positive start to the day, investors not only responding to the gains in the U.S equity markets on Monday, but the upside in the U.S futures markets in the early part of the day.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the morning to provide direction for the EUR, leaving the markets to consider consumer confidence figures out of France and Italy and business confidence figures out of Italy due out later this afternoon.

While French consumer confidence is forecasted to hold steady, negative numbers out of Italy could weigh when considering the market’s heightened sensitivity to Italy and the Italian coalition government.

At the time of writing, the EUR was down 0.03% to $1.1674, with today’s stats the key driver through the day, though geo-political risk continues to linger, Turkey’s troubles far from over.

For the Pound, it’s another quiet day on the data front, with the UK market reopening following Monday’s public holiday.

A light economic calendar through the week leaves Brexit front and centre, with no-deal Brexit chatter seeing individual member states begin to discuss plans for border controls and freedom of movement ahead of next year’s departure.

At the time of writing, the Pound was down 0.14% to $1.2874, with the continued focus on Brexit expected to pin back the Pound.

Across the Pond, economic data out of the U.S is on the heavier side, with key stats scheduled for release including June house price figures, July trade data and August’s CB Consumer Confidence numbers.

While we will expect consumer confidence to be the key driver this afternoon, we can also expect some influence from other stats including wholesale inventories, the Redbook and Richmond manufacturing numbers.

Outside of the data, noise from the Oval Office will remain a factor, with the U.S now expected to shift attention to Canada, favouring a bilateral trade agreement over NAFTA.

At the time of writing, the Dollar Spot Index was up 0.06% to 94.832, with today’s stats and the ever present Oval Office the key drivers through the day.

For the Loonie, it’s a quiet day on the data front, with no material stats scheduled for release, leaving the Loonie in the hands of market sentiment towards the prospects of a bilateral trade agreement with the U.S and whether the BoC will be in a position to maintain its hawkish stance on policy.

At the time of writing, the Loonie was down 0.05% to C$1.2973, with trade chatter the key driver through the day.