Morning brief for July 10

Morning brief for July 10

Leaders from the world's leading economies broke with U.S. President Donald Trump on climate policy at a G20 summit held in Hamburg last week. On trade in investment, there were some usual platitudes about the countries’ commitment to open their markets, to fight protectionism and unfair trade practices with the legitimate trade instruments. These latter pledges were at US insistence. EC President Jean-Claude Juncker made clear that the European Union would act swiftly introducing countermeasures if the US impose steel tariffs. A decision could come any day the affected countries have already complained to the WTO. That is something that would put a drag on commodity-link currencies.

Resuming shortly the recent G20 meeting: the world’s leaders walked away hearing what they wanted to hear. They hardly changed anything, remained of the same mind they were at the start of the summit. But the silver lining is that they made dozens of fairly beautiful shots.

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This week will be especially important for the Canadian dollar which has appreciated to 1.2855 last week on Friday’s employment reports that beat market expectations. This increases the probability of the Bank of Canada’s rate hike by 0.25% on Wednesday.  A number of hawkish comments from the BOC’s officials overrode the breakdown in commodity and significantly strengthened Loonies in the course of the past weeks.  The US steel tariffs or rate states would send USD/CAD higher.

The yen has weakened in Tokyo morning on a big miss for machinery orders and a speech from Bank of Japan Governor Kuroda revealing a “no change” in the bank’s current ultra-loose monetary policy settings. USD/JPY is trading at 114.15 of writing just 20 pips from May’s high of 114.35. A break of this level could lead towards the significant resistance at 115.50. The outlook will remain bullish until quotes slide below 113.00.

Sterling was a big loser in the end of last week after missing industrial production, weaker construction output, and poor trade figures. Now, GBP/USD trades at 1.2900. The technical outlook is still neutral even though there is a potential for the slide of quotes towards 1.2800.

Aussie and Kiwi are both higher against USD in the Asian session. AUD/USD is at 0.7610 in the consolidation range of 0.7540 – 0.7660. Kiwi almost reached 0.7280. it will likely trade sideways in the upcoming sessions as there are no significant releases that would create a great swing or trough.

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