Safe-haven currencies continue to be in demand as trade tensions continue, signs of slowing economic growth and increased political uncertainties. Yen has rallied vs US$ from 112 in May19 to its current level of 106 and US$ weaken vs the index, falling to a 2 month low. US announced its halting Huawei licenses which will add to the current trade tensions. The International Energy Agency (IEA) said oil demand growth is at its lowest levels since 2008. Italy is expected to announce it will hold elections as the coalition partnership appears to be failing. Watch for US PPI data is out today, which could provide short term direction for US$.
C$ continues to hold below its 2 month lows as oil prices firmed despite the IEA’s comments. Canadian employment data is out this morning, expectations of 12.5k growth. Bias remains to buy US$ dips in the current environment.
Eur continues to hold within its current range despite Italy’s announcement of elections. A comment yesterday that Germany is considering dropping its balanced budget” goal was perceived as positive for Euro. Heading into Q3 with Italian elections and Brexit, slowing economic growth our bias is bearish for Eur.
UK contracted 0.2% in Q2 with the economy falling year over year from 1.8% to 1.2%, this is the first time the economy has shrank since 2012. The effects of Brexit has impacted the economy and GBP is sitting at the key 1.2080 vs US$. Expectations are for further GBP weakness.