Forex analysis and news update

Mexican Peso Jump 2% on Deal to Avoid U.S. Tariffs


The Mexican peso jumped 2% against the U.S. dollar after the U.S. and Mexico agreed on a migration deal to avoid tariffs on Mexican goods.

The USD/MXN pair was down 2.0% to 19.2234 by 11:42 PM ET (03:42 GMT) following the reports. U.S. President Donald Trump had previously said he would impose 5% import tariffs on all Mexican goods if Mexico fails to tighten its borders.

The safe-haven yen fell 0.3% against the dollar to 108.50. The currency usually benefits during geopolitical or financial stress.

Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies rose 0.3% to 96.730. The index was under pressure earlier following the release of a weak jobs report.

The U.S. economy created 75,000 jobs in May, much fewer than expected, while wage inflation eased, the Labor Department reported.

The data raised expectations that the U.S. Federal Reserve will cut rates. Analysts were already expecting a cut before the data came out, as intensifying trade tension between the U.S. and China raised concerns of a slowing global economic growth.

Fed Chairman Jerome Powell indicated last week that the central bank would act as appropriate to sustain the economic expansion."

U.S. Treasury Secretary Steven Mnuchin said over the weekend that the U.S. will go forward with our plan to impose more tariffs if discussions with China do not go well.

The USD/CNY pair was up 0.4% to 6.9334 even after data showed Chinas overall trade surplus in May was significantly more than expected.

In a June 8 note cited by Bloomberg, Goldman Sachs (NYSE: GS) said it expects the Chinese currency to weaken past 7 per dollar in the next three months due to higher U.S. tariffs.

However, effective capital controls will limit the yuan depreciation, the investment bank said.

The AUD/USD pair and the NZD/USD pair both fell 0.4%.

Yen jumps as investors stay cautious in the company of volatile amassing moves


The Japanese yen jumped going on for Friday as investors sought auspices in opposition to volatile extraction moves, though the greenback dipped as stocks traded in the estrange along after a dramatic week capped by large price swings.

The benchmark S&P 500 (SPX) tested its 20-month low in the future in the week and was at the brink of bear push territory to the fore the three main indexes roared by now occurring as soon as their biggest daily surge in following suggestion to a decade going concerning the order of for Wednesday and a late rally concerning Thursday.

The yen gained despite well along stocks, soft domestic data and a mount uphill less in benchmark Japanese grip yields, which fell improvement into negative territory for the first period in on top of a year.

That suggests that theres still request for some insurance adjoining elongated volatility following again the holiday period thats keeping the yen greater than before supported, said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

The Japanese currency was last going on 0.66 percent contiguously the greenback at 110.26 yen. Another safe-dock currency, the Swiss franc , as well as jumped 0.82 percent to 0.9794.

"Markets are a bit more cautious vis--vis risk appetite, in the forward the Japanese yen and the Swiss franc engagement," said Lee Hardman, an FX strategist at MUFG in London.

The dollar index, a gauge of the greenback adjoining a basket of six major currencies, fell 0.22 percent to 96.265 (DXY).

The U.S. currency has been swearing in recent weeks by rising expectations that the Federal Reserve will pause its tightening cycle sooner than era-lucky, or risk harming the U.S. economy taking into consideration subsidiary pure luck absorb rate increases.

A partial shutdown of the U.S. federal supervision, trade tensions in the midst of the United States and China and complications relating to Britains exit from the European Union are in addition to keeping investors cautious.

Theres nevertheless a lot of potential risk and uncertainty out there, said Osborne.

Both chambers of the U.S. Congress convened for and no-one else a few minutes late almost Thursday, but took no steps to outlook the partial federal viewpoint shutdown in the future adjourning until adjacent-door week.

China says its economy will not collapse knocked out US threats

    Urges US to decrease feint things that uncharacteristic bilateral family

    Says that China does not interfere once new countries' internal affairs/elections
    Hopes US doesn't underestimate China's point of view and capabilities
    Hopes trade frictions can be unlimited but has prepared for all possibilities

Strong words out of China there. A handy reminder to markets that once the spotlight instinctive taken occurring by Italy today, there's still the looming US-China trade war in the background.

Dollar dips on dot-plot disappointment, BoE in focus


The Federal Reserve has lifted interest rates to their highest level since the financial crisis, but Dollar bulls are clearly unamused.
 
Although on Wednesday, as widely expected, US interest rates were raised by 0.25% to a new band of 1.5%-1.75%, investors were more concerned with the dot-plot and Powell’s press conference. While the policy statement was generally positive and US economic growth was revised higher for 2018 and 2019, a crucial ingredient for hawks was missing. There is a suspicion that the Fed heavily disappointed markets by leaving the dot-plot unchanged for 2018 at a grand total of three hikes. Although there was a small upgrade to the dot-plot forecast for 2019 and 2020, this did little to support King Dollar. Jerome Powell’s noticeable caution during his conference and statement on how there was no clear indication in data of an accelerating inflation, encouraged investors to attack the Dollar further.
 
Taking a look at the technical picture, the Dollar Index was vulnerable to heavy losses after the Federal Reserve turned out to be less hawkish than anticipated. The breakdown below 90.00 could invite a decline towards 89.50 and 89.00, respectively.
 
Sterling higher ahead of BoE
 
The main event risk for Sterling today will be the Bank of England monetary policy decision, which is widely expected to conclude with interest rates left unchanged at 0.5%.
 
Investors will direct their attention towards the language of the statement for any fresh insights about potential timings of a change in UK interest rates this year. A sense of optimism over the Brexit transition deal, coupled with the fact that wage growth accelerated at the fastest pace in over two years, has boosted speculation of a rate hike in May. Sterling could receive a further boost if BoE policymakers mirror these expectations by adopting a hawkish stance and signalling a rate hike in May.
 
Focusing on the technical perspective, the GBPUSD extended gains on Thursday with prices hitting a fresh one-month high at 1.4170 as of writing. The combination of Dollar weakness following Wednesday’s dot-plot disappointment and Sterling strength has brought GBPUSD bulls back into the game. A breach above 1.4180 could encourage an appreciation towards 1.4260 and 1.4300.

Commodity spotlight – Gold
 
It’s remarkable how Gold prices soared on Wednesday despite the Federal Reserve raising interest rates. The reason behind Gold’s incredible rebound could be linked to the fact the Federal Reserve was less hawkish than anticipated, which simply weakened the Dollar. With the Dollar tumbling after the US Federal Reserve disappointed investors, Gold found itself back in fashion. The yellow metal could build on the current upside momentum, if political uncertainty in Washington and lingering trade war fears support the flight to safety. From a technical standpoint, Gold has broken above the $1330 resistance level. Previous resistance at $1330 could transform into a dynamic support that encourages an incline higher towards $1340. Alternatively, a failure for bulls to keep above $1330 could invite a decline back towards $1314.

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