Market Roundup
• U.S., Mexico reach NAFTA deal, turning up pressure on Canada.
• U.S-Mexico trade deal stands even if Canada left out-Mexican minister .
• Canada's Freeland to travel to Washington Tuesday for NAFTA.
• Markets may be signaling rising recession risk -Fed study .
• US Jul National Activity Index, 0.13, 0.43 prev, 0.48 revised.
• China's higher inflation not big problem - state planner vice-chairman.
• France to make contingency plans for no-deal Brexit.
• World Court hears Iran lawsuit to have U.S. sanctions lifted.
Looking Ahead - Economic Data (GMT)
• No major economic events are scheduled
Looking Ahead - Events, Other Releases (GMT)
• 08:00 The ECB releases monthly data on lending and money supply
• 11:00 The ECB’s chief economist Peter Praet participates in a panel on "monetary and macroprudential policy interactions" at 33rd Annual Congress of European Economic Association in Cologne, Germany
Currency Summaries
EUR/USD is likely to find support at 1.1586 levels and currently trading at 1.1683levels. The pair has made session high at 1.1692 and hit lows at 1.1630 levels. The euro rose against dollar Monday as dollar dipped as risk appetite improved and investors unwound some safe-haven bets on the currency after the United States and Mexico reached a trade deal.The greenback had already been pressured by Federal Reserve Chairman Jerome Powell's comments on Friday that seemed to suggest a slower pace of monetary tightening. The trade deal with Mexico extended those losses. The United States and Mexico agreed to replace the North American Free Trade Agreement, or NAFTA, and talks with Canada were expected to begin immediately in hopes of reaching a final agreement by Friday, a senior U.S. trade official said. The political stakes are high for all three countries. Trump and Republicans in the U.S. Congress up for reelection in November want to ensure farmers and other voters whose jobs depend on trade with Canada and Mexico that the deal is sealed. In late afternoon trading, the dollar index , was down 0.4 percent at 94.768, after slipping more than 0.5 percent in the previous session. The euro rose 0.5 percent to $1.1683 after climbing as high as $1.1693, a four-week peak. The currency advanced more than 0.7 percent on Friday.
GBP/USD is supported in the range of 1.2800 levels and currently trading at 1.2896 levels. It reached session high at 1.2901 and dropped to session low at 1.2870 levels. Sterling firmed against the dollar on Monday as dollar dipped after risk sentiment in the broader markets improved following a well-received speech from Federal Reserve Chairman Jerome Powell. At a closely watched symposium at Jackson Hole, Wyoming, the Fed chairman on Friday emphasised the central bank's push to raise interest rates despite President Donald Trump's recent criticism of higher borrowing costs. Powell made the case that gradual rate hikes are the best way to protect the U.S. economic recovery and keep job growth as strong as possible and inflation under control.His comments were also seen to have disappointed some dollar bulls hoping for a more hawkish message. Since hitting a more than one-year high in mid-August, the dollar has fallen about 2.3 percent after Trump criticized the Fed for raising interest rates at a time when the government was trying to stimulate the economy. Interest rate hike expectations have supported the dollar this year as the U.S. economy tracked a stable growth path.Traders fully priced in the likelihood that the Fed would increase short-term rates a quarter point to 2.00-2.25 percent at its Sept. 25-26 policy meeting, CME Group's FedWatch program showed.
USD/CAD is supported at 1.2938 levels and is trading at 1.2956 levels. It has made session high at 1.3102 and lows at 1.2952 levels. The Canadian dollar strengthened to a two-month high against its U.S. counterpart on Monday as investors bet that an agreement between the United States and Mexico to overhaul the NAFTA trade pact would lead to a trilateral deal that includes Canada. The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact. But details of gains and concessions in the deal were only starting to emerge on Monday, and Trump threatened he still could put tariffs on Canadian-made cars if Canada did not join its neighbors. Negotiations between the three trade partners have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar both gained against the dollar after Monday's announcement. Gains for the loonie came despite Bank of Canada Governor Stephen Poloz playing down on Friday the recent jump in inflation. The rise in inflation to a nearly seven-year high of 3 percent in July was due to transitory factors, Poloz said in an interview in Jackson Hole, Wyoming. The Canadian dollar was last trading 0.5 percent higher at C$1.2956 to the greenback. The currency touched its strongest since June 14 at C$1.2952.
AUD/USD is supported around 0.7293 levels and currently trading at 0.7345 levels. It hit session high at 0.7355 and made session lows at 0.7321 levels. The Australian dollar held firm against greenback on Monday after the passing of political uncertainty at home combined with a recovery in risk appetite globally to recoup recent losses. The Aussie had taken a spill late last week when turmoil in the ruling Liberal Party saw Prime Minster Malcolm Turnbull ousted and replaced by Treasurer Scott Morrison. Aiding Aussie sentiment was Beijing's latest effort to stabilise the yuan, which saw the currency fixed higher on Monday. Recent weakness in the yuan has pressured other emerging market currencies and commodity prices, spilling over into the resource-sensitive Aussie. Helping risk appetite globally were comments from Federal Reserve Chairman Jerome Powell on Friday that the economy was not overheating and inflation expectations were well anchored. Investors took that to mean there was less risk the Fed would turn more aggressive with its rate hikes, which nudged down longer-term Treasury yields and undermined the U.S. dollar. That gave a lift to the Aussie. The Aussie dollar hovered at $0.7346 having bounced 1 percent on Friday from a trough of $0.7238. It faces stiff resistance at last week's top of $0.7333.
Equities Recap
European auto shares surged more than 2 percent on Monday as news of a U.S.-Mexico agreement on NAFTA added to the bullish sentiment generated by U.S. Federal Reserve chairman Jerome Powell's market-friendly speech.
The pan-European FTSEurofirst 300 ended the day down by 0.57 percent, Germany's Dax ended up by 1.2 percent, France’s CAC finished the day up by 0.9 percent.
The S&P 500 and the Nasdaq rallied to record highs on Monday, with the Nasdaq breaking above the 8,000 level for the first time, as investors were encouraged by news that the United States and Mexico reached a trade agreement..
Dow Jones closed up by 1.02 percent, S&P 500 ended up by 0.77 percent, Nasdaq finished the day up by 0.92percent.
Treasuries Recap
U.S. Treasury yields rose on Monday as Mexico and the United States reached a deal on bilateral issues in the renegotiation of the North American Free Trade Agreement (NAFTA), stoking some selling of safe-haven Treasuries holdings.
On light, summer volume, the yield on two-year Treasuries was up over 1 basis point at 2.645 percent. The 10-year yield was nearly 2 basis points higher at 2.844 percent
Commodities Recap
Gold gained above $1,200 per ounce on Monday as the dollar weakened after the United States and Mexico struck an agreement that lowers trade tensions.
Spot gold gained 0.3 percent at $1,208.92 per ounce by 1:37 p.m. EDT (1737 GMT), earlier peaking at $1,212.38, a two-week high. U.S. gold futures for December delivery settled up $2.70, or 0.2 percent, at $1,216 per ounce.
Oil prices edged up on Monday, supported by a strengthening equities market and news that the United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA).
Brent crude rose 39 cents, or 0.5 percent, to settle at $76.21 a barrel. U.S. West Texas Intermediate (WTI) crude futures gained 15 cents, or 0.2 percent, to close at $68.87 a barrel.
