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The Dollar Bid Again Despite Trump’s Decision To Cancel Meeting With North Korea.

By Alex Edwards

GBP/USD is on the back foot again this morning. After recovering back through the 1.34 figure yesterday it was unable to hold on to the level and has since fallen back in overnight markets. The pair’s mild recovery came on the back of news that Donald Trump had cancelled his meeting with North Korea’s Kim Jung Un, news of which was initially dollar negative. The pound also got a boost early on in the day on Thursday following the release of better than expected retail sales data; the headline number was strong a 1.6% m/m vs. expectations for a reading of 0.8%. The last set of retail sales data was also revised up.

It was a surprise in a way that the pound didn’t push on further but some political concerns and the prospects of Brexit are keeping the bids at bay. BoE Governor Carney was speaking last night and said about Brexit that “a more disorderly transition, or a materially different end state from our assumption, would have implications for monetary policy”. In context, his speech wasn’t as negative as this quote suggests but nonetheless it hasn’t done the pound too many favours this morning.

Investors and traders now await the release of UK Second Estimate GDP. Mark Carney is due to speak again this afternoon too, while U.S. Durable Goods Orders from the States may also create some volatility in GBP/USD as markets thin out ahead of the long weekend in London.

The dollar dropped on Thursday after U.S president Trump called off the historic June 12 summit in Singapore with North Korean leader Kim Jong Un, the meeting would have been its first face-to-face between the two. In Trumps letter addressed to “His Excellency” he wrote “Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting”. Adding “Your talk of nuclear capabilities, but ours are so massive and powerful that I pray to God they will never have to be used”.

The meeting cancellation grabbed the headlines but the China trade war is also getting some attention; the “risk off” nature of trading was further compounded yesterday morning as President Trump announced he was opening an investigation on U.S. auto tariffs.

In other news yesterday US data including Existing Home Sales and Unemployment Claims printed weaker than expected. Investors will now be looking to today’s Durable Goods Orders but there’s a chance, given various political rhetoric that the data takes a bit of a back seat.

EUR/USD rallied on the US/North Korean news yesterday but it really didn’t last long. The pair has now broken down through the big 1.17 figure as dollar bids gather pace and key support levels at 1.1712-15 are broken. Meanwhile, EUR/GBP has been steady and opens at very similar levels to yesterday.

AUD/USD pushed above .7580 yesterday as news of US/North Korea’s meeting cancellation broke, but like most other currencies vs. the greenback, it’s lower this morning. There was little by way of local economic data released yesterday so AUD/USD took its lead from political headlines elsewhere.

The loonie was one of the worst performing currency in the G10 Group. USD/CAD spiked above 1.29 following WTI crude oil weakness, this after Russia mentioned they will discuss with OPEC if it will be appropriate to reduce output cuts given recent market developments - WTI crude oil fell 1.6% weighing on the Canadian dollar.

The CAD recovery from the 1.2920 highs yesterday came thanks to what seemed as some flexibility from the Mexican Government regarding NAFTA negotiations, but the USD/CAD pair is back above 1.29 and testing weekly highs again this morning.

NZD/USD has tracked other commodity currencies over the last 24 hours and opens lower this morning. Like its AUD cousin there was no local economic data released overnight so the “bird” has taken its lead from Trump/North Korean headlines and risk off associated news on US trade tariffs.