The dollar held firm on Monday, benefiting from its status as a safe haven as investors took the impasse in U.S.-Canada trade negotiations as a bad sign for the even trickier talks between the United States and China.
Heading into Europe, the economic calendar remains a busy one, with a slew of final manufacturing PMI reports due on the cards from the Euro area economies. However, the main event risk remains the UK manufacturing PMI release that will drop in at 08:30 GMT. North American trading will be mired with thin liquidity as US and Canadian banks are on holiday therefore is expected to be a slow and subdued start to the week.
The Dollar got an unexpected boost on Friday from risk-averse headers, turning positive against the common currency for the week. The EUR/USD pair closed at 1.1601 after trade talks between the US and Canada ended without a deal, and the US President announced it plans to move on with its deal with Mexico, which could mean the end of the NAFTA trilateral agreement. Any trade deal, however, would need Congressional approval and is unclear the Houses will accept a deal without Canada. Risk aversion was fuelled by leaked Trump’s “off the record” comments, as he said that any trade deal with Canada would be “totally on our terms.”
Weekend Brexit rhetoric from Barnier continues to weigh on the pound as we open the new week and the currency is among the laggards on the day so far. Cable opened with a move lower even in the wake of thin liquidity with the pair heading below 1.2900 briefly. As for risk events, expect Brexit headlines to dominate proceedings in September but for today we’ll also have the UK manufacturing PMI release for August.
Oil prices dipped on Monday on rising output from OPEC, while looming U.S. sanctions on Iran also remained in focus. Oil traders are likely to stay focused on potential disruptions to global crude supplies in the upcoming week, as looming U.S. sanctions on Iran are widely expected to lead to a tighter market.
The commodity looks to weaken further in the new week despite its price hesitation on Friday. Gold prices fell Monday morning in Asia, a day after Chinese President Xi Jinping gave a speech about his government’s determination to engage in economic reforms amid an escalating trade war between Beijing and Washington.