Daily Brief

Daily Brief

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Focusing on Jackson Hole

USD

The annual meeting of central bankers at the Jackson Hole Economic Symposium later this week will have traders looking for any hints of central bank policy changes. Fed Chairman Powell will speak to the conference on Friday and all will look for hints on further Fed rate cuts. Ahead of this, Federal Open Market Committee meetings release on Wednesday, giving traders a look at who dissented on last month’s rate cut. Equity markets have rebounded as have Treasury yields. Trade war concerns remain and an announcement on US doing business with tech giant Huawei is due today. 

EUR

Traders expect the European Central Bank to maintain dovish stance and move rates lower at next month’s meeting as well as add fiscal stimulus. EUR/USD at the moment seems locked onto the German bond yields. German 10-year bonds remain under pressure as investors fear a recession in Europe will happen sooner rather than later. Upside movement in the EUR/USD will be capped as investors expect stimulus measures from the European Central Bank at the September meeting.

GBP

The pound moved lower in early trading this morning as a report surfaced of possible food shortages in case of a hard Brexit. Labour leader Corbyn has called for a general election. Prime Minister Johnson heads to Germany and France on Thursday and Friday in hopes of coming to a positive solution on Brexit. Later this week, traders will be focusing on Jackson Hole and the G7 meeting over the next weekend.

JPY

JPY seeing a bit of a sell off as traders eliminate some of their safe haven trades as the equity market chaos of last week seems to be subsiding. Traders are looking for the JPY to have an “inside trading day”, meaning the currency will trade within their overnight range. As with all currencies, the JPY will trade off of news coming this week from other areas such as the Federal Open Market Committee minutes and Jackson Hole meeting. If economic recession fears return, the JPY could once again lead the pack as a safe haven purchase.

CAD

Crude oil rebounded on Friday trading above $55 and this allowed the Canadian Dollar to move higher. As the European and US equity and bond markets improve, the crude oil market improved as well. As usual, the CAD follows the USD and pressure on the greenback could put pressure on the loonie. Expectations for a year end rate cut continue and traders will be paying attention to any economic releases that could put this rate cut into focus.

CNY

China announced lower funding rates for firms as the central bank stated they will “deepen market-based interest rate reform and lower financing costs of the real economy”. This news has been seen as a positive equity move and all markets in Asia have responded positively.

USD: trading slightly higher as markets focus on Jackson Hole

USD: trading slightly higher as markets focus on Jackson Hole

EUR: Pending German bond yields

EUR: Pending German bond yields

GBP: Under a bit of pressure ahead of meeting between Johnson and Merkel

GBP: Under a bit of pressure ahead of meeting between Johnson and Merkel

JPY: Safe haven trades coming off

JPY: Safe haven trades coming off

CAD: Awaiting reports on inflation

CAD: Awaiting reports on inflation

CNY: Announced reform to lower funding costs

CNY: Announced reform to lower funding costs

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