 Last week started with anticipation of Fed Chair Jerome Powell's Jackson Hole speech, but ended with shocked escalation of US-China trade war. Risk aversion should continue to dominate the markets this week, as hard-line rhetorics are expected from both sides. Indeed, they look moving away from a September trade meeting, rather than towards it. Sterling ended the week as the strongest on hope that UK Prime Minister Boris Johnson could find alternatives on Irish backstop that avert no-deal Brexit. Yen and Swiss Franc were among the strongest naturally in risk averse environment. Though, Euro also firmed up against most, with help from the rebound against Dollar. Commodity suffered most as led by Australian and New Zealand Dollars. Euro's path will be an interesting one to watch this week. Firstly, it's clear that ECB is preparing for a package of monetary stimulus for September meeting. Secondly, recent data indicates no sign of recovery in Germany's economy. It could also be argued that Eurozone economy, which is already weak, won't be immune from any US-China trade war escalation. Thirdly, Euro is facing Italian political turmoil, as well as risk of no-deal Brexit. So, we're not too convinced by EUR/USD's rebound. And selloff in EUR/JPY and EUR/CHF could drag EUR/USD down ahead. We'll see how it goes. |
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