Market Drivers August 30, 2019
UK- EU will step up talks
EUR flirts with 1.1000 lows
Nikkei 1.19% Dax 1.02%
UST 10Y 1.53%
Oil $56/bbl
Gold $1525/oz
BTCUSD $9440

Europe and Asia:
EU GE Retail Sales -2.2% vs. -1.3%
EU EUR Core CPI 0.9% vs. 1.0%

North America:
CAD GDP 8:30
USD PI/PS 8:30
USD Chicago PMI 9:45
USD U of M 10:00

It’s been a generally quiet last trading day of the month with little fresh newsflow to drive the currency markets as risk-on flows from yesterday were muted somewhat by reports of arrests in Hong Kong and dour economic data from across the globe.

Reports that several HK protest leaders have been arrested weighed on investor sentiment as fears grow that China may be close to using force to dampen the summer-long protests that have gripped the city. USD/JPY failed to make any progress beyond the 106.50 level in Asian or early European trade as traders kept a wary eye on the developments in the region.

In New Zealand the kiwi hit four-year lows breaking below the .6300 levels on news of weaker building approvals data. Business sentiment remains very depressed given the ongoing global trade tensions and markets are preparing themselves for further cuts from the RBNZ after a surprise 50bp cut this month.

However, the most interesting price movement of the night may have been in EUR/USD which is once again flirting with the 1.1000 figure as data continues to point to a possible recession in the region while policymakers refuse to consider any immediate stimulative action. Today’s German Retail sales printed at -2.2% versus -1.2% eyed indicating that the manufacturing recession in Europe’s most important economy is starting to spread into consumption. Yet European monetary officials and German politicians continue to state that no policy action will be taken until the economy actually tumbles into a recession.

This sense of policy inertia is starting to weigh on longer-term EUR/USD sentiment. Several analysts have pointed out that it is already trading at all-time lows on a total return basis if you take roll into account. However, from a spot basis, the area of interest is the 1.1000 level which has been probed more than once over the past few weeks but has managed to hold. Now, however, as US rates rebound the downside pressure on EUR/USD will increase. There is little economic data on the docket today but if US 10Y yields continue to recover euro shorts may take a run at the 1.1000 break before the holiday weekend arrives.