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Dollar Opens Broadly Stronger Ahead Of Much Anticipated US GDP

By Alex Edwards

GBP/USD fell throughout the day yesterday, mostly a result of a strengthening dollar. It broke down below the 100 and 200 hour moving average but has at least been steady through the overnight session. There wasn’t much by way of UK economic data on Thursday to make mention of and political and Brexit headlines – mostly negative - continue to dominate, albeit there was no fresh news in this regard yesterday.

Theresa May flies off to Austria today for further Brexit talks, this after EU chief negotiator Michel Barnier said on Thursday that the EU "will not delegate the application of its customs policy and rules and VAT and excises duty collection to a non-member who would not be subject to the EU's governance structures". After talks with the Austrian chancellor and Czech PM the UK PM then goes off on her summer hols.

Today shouldn’t be too much different to yesterday, as far as trading of cable is concerned. There’s no UK data due out and the Brexit headlines, as well as US data, will likely take centre stage.

The dollar finished the day broadly stronger yesterday. It pushed higher vs. both the pound and euro and opens firmer against both currencies this morning. US data was mixed yesterday with durable goods orders missing expectations and unemployment claims printing in line with market forecasts.

In other news yesterday, President Trump held a joint press conference with President Juncker saying “we expect something very positive” to come of their meeting. The two announced that they would essentially be pulling back from all-out trade war and would work to reduce tariffs. This was one of the catalysts for the dollar strength.

Markets now turn their attention to the US Q2 GDP number, due for release this afternoon. This data may create some volatility.

EUR/USD dropped to a weekly low, down 0.8% to 1.1640 after the ECB kept rates unchanged, as expected, and reiterated a pledge to keep them flat until mid-2019. EUR/USD also fell despite Draghi sounded fairly upbeat in his accompanying presser. Despite the risk of a trade war, the ECB president said that the latest data indicated the region was “proceeding along a solid and broad-based growth path”.

EUR/USD opens close to where it finished the day yesterday. Unless US GDP surprises, it could be a quiet finish to the week for the single currency.

The Australian Dollar once again is back under the 74c handle against the greenback relinquishing all gains from the session prior. The AUD/USD suffered at the hands of a stronger US dollar falling from 0.7463 down to 0.7372. The move was sparked by a sharp drop in copper prices and a broadly stronger dollar.

Australian PPI data, released overnight failed to do the aussie dollar any favours, showing that producer price inflation slowed again, this time coming in at 0.3% vs. forecasts for 0.5%. It creates a bit more of a headache for the RBA as the inflation rate shows few signs of recovering off of the lower end of its desired band.

The USD/CAD ended the session 0.20% higher, in line with broad USD strength against all major currencies, at 1.3072.

The loonie was trading at the highest level in a month versus the USD, around 1.3030, but couldn’t hold onto gains despite comments by US Trade Representative Robert Lighthizer around NAFTA and the possibility of reaching a tentative accord next month.

Support for the USD/CAD sits now on yesterday’s lows around the 1.3030s while 1.31 should act as short-term resistance.

The New Zealand dollar opens lower this morning having fallen sharply through trade yesterday as it seemed global trade tensions were starting to ease. The NZD touched intraday highs at 0.6851 following an upbeat press conference between President Trump and EU Commission President Jean Claude Juncker where both leaders promised to work toward zero tariffs. The impromptu press conference fostered a short term upward run on commodity currencies. The Kiwi however then gave up gains as investors expect Trump’s attentions to return to US-Sino trade hostilities. As the tariff battle between the US and China continues and the CNY remains under pressure the upside demand for the NZD will likely be short.

Opening this morning 8 tenths of a cent lower, the kiwi currently buys just 0.6779 U.S cents as attentions turn to an all importing US GDP indicator. With expectations for an exceptionally strong Q2 a print at or around 4.8%-5% could prompt further dollar strength into the weekend and see the kiwi test lows nearing 0.6720.