The foreign exchange market is always susceptible to changing national and global economic dynamics taking place in different locations and industries.
Dollar Turns Broadly Higher
On Wednesday, the greenback broadly turned higher against the other major currencies. The Dollar regained some strength following a statement by Paul Ryan, U.S. House Speaker that a tax plan outline supported by House tax writing committees will be released on 25th September.The Dollar had shown weakness earlier following data indicating that producer price inflation in the US and its core reading had risen less than what was expected during the month of August.
With indications that geopolitical tensions were subsiding, at least in the near-term, the move by investors to safer assets has slowed down. No longer are investors dumping US equities in preference of the relative safety offered by US Treasuries.
Brexit Negotiations Delayed
Brexit negotiators have postponed the round of divorce talks scheduled for next week by another week. This is seen by market analysts as another sign that Theresa May, UK’s Prime Minister intends to give a public speech dwelling on her latest Brexit strategy. Officials from both sides, Britain and the European Union, were scheduled to meet on Monday in Brussels but will now be meeting on 25th September.
According to a spokesman of the U.K. government, the aim of delaying the negotiations is to accord both teams more time towards ensuring progress is made when they meet. Another official who spoke on condition of anonymity says the reason for the postponement had something to do with the political calendar in Britain. The meeting delay is being formalised only a week after Guy Verhofstadt, of the European Parliament said Theresa May was getting ready to make known a crucial “intervention” that may necessitate rescheduling. It is expected that forex trading will sharply react to whatever comes out of next week’s negotiations.
NZD/USD, AUD/USD Divergence Continues
While the U.S. Dollar continues to display weakness, since late July, the NZ Dollar has even been weaker. The previously witnessed high-flying NZD/USD trend continues to falter.
Recently, the AUD/NZD has seen a rather brisk run. The pair is showing a trend-line that began about two months ago. While this can throw wide open the door to the cross-pair topside setups, it could also be utilised in taking a hedged stand around the US currency for those seeking to sell NZ Dollars and buy AUD against the Dollar.
Gold Prices Fall May Continue
Prices of gold plunged as a global recovery in risk appetite appeared to send capital flows out of Treasury bonds safety, pushing yields upward as well as shares. Likewise, the chipper mood was felt in Federal rate hike expectations, sending the Dollar upward.
Not surprisingly, this had the effect of undermining the appeal of anti-fiat assets and those that are non-interest-bearing. Prices of crude oil paused to consolidate losses following the largest drop in a period of 3-months on Friday.
Pound Advance against the Dollar Set to Continue
Last week, the British Pound showed strong recovery against a weakened US Dollar and there’s not much evidence that would suggest that the climb is fanning out. While the continued UK economy’s weakness may imply little or zero chance of higher interest rates in the UK for some time ahead, odds of a rise in the near-term in the US are dimming – effectively taking away the advantage enjoyed by the Dollar within forex trading markets. Pitted against other majors like Japanese Yen and the Euro, a period of relative Pound stability is likely.
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