Forex witnessed notable US dollar demand in Asia this Tuesday, as Emerging Markets worries, and trade war fears reinforced the safe-haven appeal of the buck. Emerging markets have been hard hit by concerns that higher U.S. interest rates will pressure countries that have borrowed heavily in dollars in recent years.
The Yen lost ground, having pushed the USD/JPY pair back above the 111.00 handle after BoJ’s routine QQE adjustment was not seen as a hawkish tweak. The EUR and the GBP were also better offered amid mixed tone on the Asian indices and subdued oil prices, as we progress towards the European opening bells.
Today’s EUR macro calendar see a plenty of events, starting off with the Swiss CPI at 07:15 GMT, followed by the UK construction PMI for August due at 08:30 GMT. Also, the Eurozone producer price index (PPI) data will drop in at 09:00 GMT. However, the key event for EUR, GBP traders is likely to be the Bank of England (BOE) inflation report hearings scheduled at 12:15 GMT. In the NA session, markets return after Monday’s Labour Day holiday, with the focus on the Canadian Markit manufacturing PMI and ISM manufacturing PMI report from the US among other minority reports, at 13:30 GMT and 14:00 GMT respectively.
On Monday, European shares ended mostly flat, and a weak British pound helped to lift London’s blue-chip FTSE almost 1%, while U.S. markets were closed for Labour Day.
Oil prices were mixed on Tuesday, as trade was slow because of the U.S. stock markets were on holiday on Monday. Oil prices have been driven higher in the past few months as demand for oil outstrips supply, while upcoming U.S. sanctions against Iran have pushed prices up. The financial sanctions against Iran will target the petroleum sector of Iran in November, when a drop of crude supply is expected.
Gold markets were shifting during the trading session on Monday, as the US banks were on holiday. The strengthening US dollar has worked against the Gold rather significantly, but over the last couple of sessions Gold remained bound between the $1200 level, a psychologically and structurally important level. All in all, the US dollar will drive where this market goes.