Trade

Russia headlines continue to drive risk sentiment, pulling futures off session highs.

Gold trades below $1850 ahead of the Fed. USDCAD falls ahead of the BoC.

The U.S. Dollar Currency Index rises as U.S. economic data beats estimates.

Thursday’s forex report, along with European and U.S. economic data.

The overall weakness of the U.S. Dollar is pushing up the GBP/USD currency pair.

EURUSD is sorrowing on the weak USD

Despite a busy economic calendar in the US this week, including yesterday’s decent ISM Non-Manufacturing report, today’s ADP employment report, and Friday’s always impactful Non-Farm Payrolls release, US-China trade developments remain the dominant driver for US stocks.

Today’s economic calendar is light on traditional economic data, but heavy on high-stakes testimonies with President Trump’s former attorney Michael Cohen, US Trade Representative Robert Lighthizer, and Fed Chair Jerome Powell all getting grilled by lawmakers, simultaneously. Michael Cohen’s testimony could have long-term legal ramifications for the President, but comments from the other two policymakers have more near-term significance for traders.

Today’s economic calendar is light on traditional economic data, but heavy on high-stakes testimonies with President Trump’s former attorney Michael Cohen, US Trade Representative Robert Lighthizer, and Fed Chair Jerome Powell all getting grilled by lawmakers, simultaneously. Michael Cohen’s testimony could have long-term legal ramifications for the President, but comments from the other two policymakers have more near-term significance for traders.

Two weeks ago, we highlighted 3 reasons USD/JPY was hitting its highest levels of the year, including positive US-China trade talk and a continuation after a big technical breakout. Those two factors remain in force after President Trump delayed the escalation of tariffs on Chinese goods this weekend (see “S&P 500 Probing 4-Month High Above 2800 on US-China Trade Optimism” for more), so it’s not surprising that we’ve seen USD/JPY’s bullish momentum carry over.

After two weeks of constructive trade talks on both sides of the Pacific, we suggested that traders were “expecting the increase in tariffs will be delayed…with some sort of agreement following in either late March or early April.” On Sunday night, President Trump confirmed that he would be delaying the tariff escalation and planning another summit between President Xi and himself (date TBD).

US and Chinese trade negotiators kicked off another round of talks today after President Trump labeled last week’s discussions in Beijing “very productive.” Today and tomorrow feature lower-level officials to the table, with higher-level policymakers including US Trade Representative Lighthizer, Treasury Secretary Mnuchin, and Vice Prenier Liu He, coming to the table on Thursday and Friday.

At a good $1325 per ounce, the precious metal is trading just under its 2019 high of $1326 it hit at the end of January. Gold is now not too far off the 2018 peak of $1366, where I think it is potentially heading to over the coming weeks.

In the middle of the week, the RBNZ opted to leave its primary interest rate unchanged at 1.75%, where the central bank expects it to remain for a “considerable period.” Governor Orr and company noted that there were both upside and downside risks to inflation; therefore, the next change to interest rates could either be higher or lower.

FX trade is well underway for the week, and so far, last week’s theme of US dollar strength has carried over into this session’s trade. The most interesting development among the major currencies is today’s big breakout above 110.00 in USD/JPY, a move that’s taken the pair to its highest level year-to-date.