BOE: Trade War Risks Have Intensified

Dollar Down On Fed Rate Cut

The US dollar has traded firmly lower over the European session so far on Thursday. USD came under selling pressure last night as the Fed cut rates by a further .25%. Despite policymakers being divided over the decision to ease further, and diminished prospects of a further 2019 cut, USD is trading lower in the near term with USD index trading 97.89 last.

EUR Rises on Weak USD

EURUSD has benefitted in the wake of another rate cut from the Fed with price trading back up to 1.1061 last, rallying firmly above the 1.1025 level. EUR has failed to move lower in the wake of the ECB announcing further easing. For now, focus remains tilted to the upside for the single currency.

Pound Down As BOE Cite Increased Risks

GBPUSD has been a little weaker today, despite softness in USD. UK inflation, released yesterday, printed its lowest level in three years over August, highlighting deteriorating price pressures in the UK ahead of the October 31^st Brexit deadline. As expected, the BOE kept rates on hold at the September MPC meeting today though noted that trade war risks have intensified along with Brexit uncertainty continuing to cause volatility in data. GBPUSD trades 1.2459 last, still above the 1.2382 level.

Risk Assets Muted

A fresh easing announcement from the Fed has failed to boost risk assets this week. The division among Fed members over the decision to ease, as well as the division over the likely need for further easing, has taken some of the wind out of the recent move higher in risk markets. The SPX500 trades 2998.48 last, with price hovering just beneath all-time highs.

JPY Rallies on Fed Rate Cut

Safe havens have had a mixed session so far today with JPY higher against USD but gold lower. The diminished prospect of further Fed easing has capped XAUUSD upside for now with price trading 1496.06 last, sitting well beneath the key 1522.75 level. USDJPY trades sharply lower today at 108.00, as of writing. Fresh easing from the Fed has caused a jump in the yen which might cause issues for the BOJ ahead of its meeting this week.

Fresh Iran Sanctions Weigh on Oil

Oil prices have been higher today, taking advantage of a weaker USD. News of fresh US sanctions on Iran, as well as an unexpected rise in US crude stores caused a large sell-off in oil this week. The market remains dislocated following the record move higher at the start of the week though receding geopolitical tensions have seen oil prices erasing most of the week’s gains. Crude trades 59.24 last, sitting back above the 58.82 level.

CAD Capped

USDCAD has been higher today, despite the sell-off in USD as general weakness in crude prices has kept CAD weighed down. USDCAD pierced above the 1.33 level yesterday before reversing post-FOMC. August payroll estimates will be the key data for CAD traders later today.

Aussie Under Pressure

AUDUSD has moved heavily lower again today. Reduced prospects of further US easing over the rest of the year, as well as weakness in gold prices, has weighed on AUD this week. The sell-off extends the moves seen earlier in the week in response to the RBA meeting minutes which showed a heightened chance of forthcoming RBA easing.