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In the Zone
- Talk about North and South Korea set to hold talks may be something too little too late. We saw over the weekend the US testing their own missile capabilities which says a lot. I suspect that China may also start to get concerned as they have done nothing to help the rising tensions – and Donald Trump doesn’t come across as a forgiving guy.
We waited for what seemed like an eternity for the dollar to show a little bit of grit, and Friday it did fight back, the question on the lips of the market will start to be around whether it was a relief rally or the start of a correction. I have long maintained that the move against the greenback was overdone, the reasons for the big move was on hawkish central banks and as I have said before, that hawkish did not make sense to me – especially the commodity currencies.
The first catalyst for the rally came in the form of the always anticipated NFP reading which beat expectation, the employment read also dipped but for the first time the jobs number was seen as inflationary. It was not until comments from White House advisor Cohn who hinted that Trumps tax plan had major incentives for companies to repatriate corporate cash, did the dollar rally take hold. The market loves fiscal stimulus, whilst the White house Administration is clouded in scandal you can’t criticise their effort in trying to create some change.
So the dollar ended the week as “King for a day,” and I will be watching with bated breath if this move is able to continue its recent rally. Judging by the Asian Pacific session, the market is still not convinced as we have seen a very subdued open to the market – it will perhaps be the New York session that dictates the move for the week.
This week I will be keeping a keen eye on the kiwi, it is trading at make or break levels right now but I suspect that the interest rate decision later in the week will be the catalyst for the move lower. The NZD cannot afford to be strong right now and after the market interpreted the last statement to be hawkish I suspect that Gov. Wheeler will use a press statement this week to jawbone the currency weaker.
August is a notoriously tough month to trade as the Northern Hemisphere enjoy the last of their summer break. Recent times have shown some increased volatility and I still believe that Jackson Hole in a couple of weeks has the potential for some fireworks, but until then take care out there.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
Nothing of significance
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