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Andro Matugas-Barnes
Jul 01 2019

TAT FX Brief: July19

News & Insights
TAT FX Brief: July19
<p><strong>Welcome to FY19/20!</strong></p> <blockquote> <p>This week&rsquo;s focus for investors will be on this weekend&rsquo;s decision by the United States and China to resume trade&nbsp;talks after U.S. President Trump and Chinese President Xi Jinping met at the G-20 summit in Osaka, Japan.</p> <p>On paper&nbsp;the news is bullish for the Australian Dollar, since the country is China&rsquo;s largest trade partner. However, there are still&nbsp;concerns that the trade dispute will continue to linger on because the two parties are still wide apart on issues.&nbsp;</p> </blockquote> <p>The Australian Dollar finished sharply higher last week with the price action driven by central bank comments.&nbsp;Surprisingly hawkish remarks by the Reserve Bank of Australia (RBA) Governor helped underpin the Aussie, while the&nbsp;Reserve Bank&nbsp;of New Zealand (RBNZ) decision to leave rates unchanged in June fueled the rally in the Kiwi.</p> <p>Last week, the&nbsp;AUD/USD&nbsp;settled at .7022, up 0.0096 or +1.39%&nbsp;</p> <p>Expectations of a U.S. Federal Reserve interest rate cut at its July 30-31 monetary policy meeting also helped drive&nbsp;the Aussie higher even after dovish comments from Federal Reserve Chairman Jerome Powell and St. Louis Federal&nbsp;Reserve President James Bullard dampened hopes by some investors that Fed policymakers would&nbsp; deliver a half-point interest rate cut in July. A 100% chance of a 25 basis point rate cut is still being priced in my U.S. Federal Funds&nbsp;investors.</p> <p><strong>Australian Dollar</strong></p> <p>Although the RBA is expected to cut rates this week on Tuesday, comments last week from RBA Governor Philip&nbsp;Lowe indicated a somewhat dovish tone moving forward. Lowe essentially said that to expect a further interest rate cut&nbsp;was &ldquo;no unrealistic&rdquo;.&nbsp;</p> <p>In a prepared speech, Lowe acknowledged that lower rates could help boost price power via the channel of weaker&nbsp;currency but also that monetary options were not the only one available. Lowe further pointed out that there is only so&nbsp;much that another quarter-percentage point cut can hope to achieve.&nbsp;</p> <p>Short-sellers read the comments as dovish and an indication that the July 2 cut may be the last this year, thereby&nbsp;triggering an aggressive short-covering rally throughout the week.</p> <p><strong>Forecast&nbsp;</strong></p> <p>This week&rsquo;s focus for investors will be on this weekend&rsquo;s decision by the United States and China to resume trade&nbsp;talks after U.S. President Trump and Chinese President Xi Jinping met at the G-20 summit in Osaka, Japan.&nbsp;</p> <p>On paper the news is bullish for the Australian Dollar since the country is China&rsquo;s largest trade partner. However,&nbsp;there are still concerns that the trade dispute will continue to linger on because the two parties are still wide apart on&nbsp;issues.</p> <p>The direction of both the Aussie and the Kiwi will be determined by how optimistic speculators are that a trade deal&nbsp;could be struck before sending the global economy into a recession.</p> <p>On Tuesday, July 2, the RBA is expected to cut its benchmark interest rate 25 basis points to 1.00%. This move has&nbsp;already been discounted. Traders will also get the opportunity to react to data on Building Approvals and Retail Sales.</p> <p>In the U.S., the key reports early in the week are ISM Manufacturing PMI and ISM Non-Manufacturing PMI. The major&nbsp;report is Non-Farm Payrolls. Traders will be watching for solid growth in the headline number, and steady Average&nbsp;Hourly Earnings and Unemployment Rate.</p> <p>Thursday, July 4 is a U.S. bank holiday so trading may be thin on Friday also. We may not see a reaction to the jobs&nbsp;data until next Monday or Tuesday.</p> <p><strong>Today&rsquo;s Ranges</strong></p> <ul> <li>AUD/USD: 0.6996 - 0.7035</li> <li>AUD/EUR: 0.6164 - 0.6192</li> <li>AUD/GBP: 0.5511 - 0.5540</li> <li>AUD/CNY: 4.7903 - 4.8308</li> <li>AUD/INR: 48.245 - 48.507</li> </ul> <p><strong>Announcements to Watch</strong></p> <ul> <li>Monday, July 1, 2019</li> </ul> <p>All Day &nbsp;&nbsp;Holiday Canada - Canada Day &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> All Day &nbsp;&nbsp;Holiday Hong Kong - Hong Kong Special Administrative Region Establishment Day &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 9:50 &nbsp;&nbsp;JPY &nbsp;&nbsp;Tankan Large Manufacturers Index (Q2)&nbsp;<br /> 9:50 &nbsp;&nbsp;JPY &nbsp;&nbsp;Tankan Large Non-Manufacturers Index (Q2)&nbsp;<br /> 11:45 &nbsp;&nbsp;CNY &nbsp;&nbsp;Caixin Manufacturing PMI (Jun)&nbsp;<br /> 17:00 &nbsp;&nbsp;CNY &nbsp;&nbsp;PBOC Gov Yi speaks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 17:55 &nbsp;&nbsp;EUR &nbsp;&nbsp;German Manufacturing PMI (Jun)&nbsp; &nbsp;<br /> 17:55 &nbsp;&nbsp;EUR &nbsp;&nbsp;German Unemployment Change (Jun)<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Manufacturing PMI (Jun)&nbsp; &nbsp;</p> <ul> <li>Tuesday, July 2, 2019</li> </ul> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;ISM Manufacturing PMI (Jun)&nbsp;&nbsp;<br /> 14:30&nbsp;&nbsp; AUD &nbsp;&nbsp;RBA Interest Rate Decision (Jul)&nbsp;<br /> 14:30&nbsp; AUD &nbsp;&nbsp;RBA Rate Statement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Construction PMI (Jun)&nbsp; &nbsp;</p> <ul> <li>Wednesday, July 3, 2019</li> </ul> <p>Holiday United States - Independence Day - Early close at 13:00 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 0:05 &nbsp;&nbsp;GBP &nbsp;&nbsp;BoE Gov Carney Speaks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Services PMI (Jun)&nbsp; &nbsp;<br /> 22:15 &nbsp;&nbsp;USD &nbsp;&nbsp;ADP Nonfarm Employment Change (Jun)&nbsp; &nbsp;</p> <ul> <li>Thursday, July 4, 2019</li> </ul> <p>All Day &nbsp;&nbsp;Holiday United States - Independence Day &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;ISM Non-Manufacturing PMI (Jun)&nbsp;<br /> 0:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Crude Oil Inventories&nbsp; &nbsp; &nbsp;<br /> 11:30&nbsp;&nbsp; AUD &nbsp;&nbsp;Retail Sales (MoM) (May)&nbsp;</p> <ul> <li>Friday, July 5, 2019</li> </ul> <p>22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Nonfarm Payrolls (Jun)&nbsp; &nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Unemployment Rate (Jun)&nbsp; &nbsp;<br /> 22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Employment Change (Jun)&nbsp; &nbsp;</p> <ul> <li>Saturday, July 6, 2019</li> </ul> <p>0:00 &nbsp;&nbsp;CAD &nbsp;&nbsp;Ivey PMI (Jun)&nbsp; &nbsp;</p> <ul> <li>Tuesday, July 9, 2019</li> </ul> <p>All Day &nbsp;&nbsp;Holiday Brazil - Sao Paulo State Rebellion Day &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <ul> <li>Wednesday, July 10, 2019</li> </ul> <p>0:00 &nbsp;&nbsp;USD &nbsp;&nbsp;JOLTs Job Openings (May)<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Manufacturing Production (MoM) (May)&nbsp;</p> <ul> <li>Thursday, July 11, 2019</li> </ul> <p>0:00 &nbsp;&nbsp;CAD &nbsp;&nbsp;BoC Interest Rate Decision&nbsp; &nbsp;&nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Core CPI (MoM) (Jun)&nbsp; &nbsp;</p> <ul> <li>Friday, July 12, 2019</li> </ul> <p>22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;PPI (MoM) (Jun)&nbsp;</p> <ul> <li>Monday, July 15, 2019</li> </ul> <p>All Day &nbsp;&nbsp;Holiday Japan - Marine Day &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 12:00 &nbsp;&nbsp;CNY &nbsp;&nbsp;GDP (YoY) (Q2)&nbsp; &nbsp; &nbsp;<br /> 12:00 &nbsp;&nbsp;CNY &nbsp;&nbsp;Industrial Production (YoY) (Jun)&nbsp; &nbsp;</p> <ul> <li>Tuesday, July 16, 2019</li> </ul> <p>8:45 &nbsp;&nbsp;NZD &nbsp;&nbsp;CPI (QoQ) (Q2)&nbsp; &nbsp;<br /> 11:30 &nbsp;&nbsp;AUD &nbsp;&nbsp;RBA Meeting Minutes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Average Earnings Index +Bonus (May)&nbsp;&nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Claimant Count Change (Jun)&nbsp;&nbsp;<br /> 19:00 &nbsp;&nbsp;EUR &nbsp;&nbsp;German ZEW Economic Sentiment (Jul)&nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Core Retail Sales (MoM) (Jun)&nbsp; &nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Retail Sales (MoM) (Jun)&nbsp; &nbsp;</p> <ul> <li>Wednesday, July 17, 2019</li> </ul> <p>18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;CPI (YoY) (Jun)&nbsp; &nbsp;<br /> 19:00 &nbsp;&nbsp;EUR &nbsp;&nbsp;CPI (YoY) (Jun)&nbsp; &nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Building Permits (Jun)<br /> 22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Core CPI (MoM) (Jun)</p> <ul> <li>Thursday, July 18, 2019</li> </ul> <p>11:30&nbsp; AUD &nbsp;&nbsp;Employment Change (Jun)&nbsp; &nbsp;<br /> 18:30 &nbsp;&nbsp;GBP &nbsp;&nbsp;Retail Sales (MoM) (Jun) &nbsp;&nbsp;&nbsp;&nbsp;<br /> 22:30 &nbsp;&nbsp;USD &nbsp;&nbsp;Philadelphia Fed Manufacturing Index (Jul)&nbsp; &nbsp; &nbsp;</p> <ul> <li>Friday, July 19, 2019</li> </ul> <p>22:30 &nbsp;&nbsp;CAD &nbsp;&nbsp;Core Retail Sales (MoM) (May)&nbsp;</p> <p><span style="font-size:8px"><em>Source:&nbsp;<a href="https://list-manage.agle1.cc/click?u=https%3A%2F%2Fwww.fxempire.com%2F&amp;c=5709624632147968&amp;s=5767466600890368&amp;ns=tatcapital" rel="noopener" target="_blank">FXEmpire</a>&nbsp;&amp;&nbsp;<a href="https://list-manage.agle1.cc/click?u=http%3A%2F%2Fwww.investing.com&amp;c=5709624632147968&amp;s=5767466600890368&amp;ns=tatcapital" rel="noopener" target="_blank">Investing.com</a></em></span></p>

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