MTS Help Center

· The euro hovered around a two-week low versus the dollar as the U.S. currency held strong on Tuesday, boosted by slightly higher Treasury yields, while political uncertainties in Italy also kept the common currency subdued.

The dollar index was flat at 98.385 after rising to a two-and-a-half week high of 98.40 earlier.

The euro was also flat at $1.1078, but not far from the $1.1066 low it reached on Friday on lingering concerns over political developments in Italy.



· Prime Minister Giuseppe Conte is set to address parliament on Tuesday afternoon (1300 GMT) to defend his record. He might hand in his resignation immediately afterwards or could instead wait for a formal vote to make it clear he is being unseated by the far-right League. A vote has not yet been scheduled and there is widespread uncertainty over how the political turmoil will end

“The possible success of the no-confidence vote in Italy today could push euro/dollar towards and even below the psychological 1.1000 level today,” said Chris Turner, head of forex strategy at ING.

“Though falls are unlikely to meaningful or persistent,” he said, “because the negative spillover into the euro from periods of political uncertainty in Europe has been somewhat limited over the past year.”




· The US Dollar may extend gains vs Nordic FX if growth concerns continue to pressure cycle-sensitive currencies and redirect capital to anti-risk assets. US-China trade tensions appear to be escalating against the backdrop of growing political uncertainty in Italy. Recessionary fears may be exacerbated this week from the release of the FOMC meeting minutes and commentary from officials at the Jackson Hole symposium.



· As outlined in my weekly US Dollar forecast, the Greenback may rise at the expense of equity markets when the FOMC meeting minutes are released. The prospect of cheaper credit has remained a key factor buoying investor sentiment as the fundamental outlook continues to dim. What the minutes will likely show is just a more detailed message from the last meeting by Fed Chairman Powell: The Fed is not as dovish as you think.

JACKSON HOLE SYMPOSIUM MAY PRESSURE NORDIC FX IF IT EXACERBATES GLOBAL GROWTH FEARS

Fears about the prospect of a recession gained momentum last week after a number of recessionary signals began to sound the alarm. Commentary from officials at the symposium may exacerbate global growth fears and could pressure export-oriented currencies like the Swedish Krona and Norwegian Krone. However, amid the uncertainty and search for liquidity, the US Dollar may catch a haven bid.

Traders will be closely monitoring the G7 Summit this week in Biarritz, France from August 22-24. Given the current state of rising geopolitical tensions around the world, looking for key developments at this conference will be crucial. Some key topics will include Facebook's Libra cryptocurrency, US-China/EU trade and discussing the replacement of IMF chief after Christine Lagarde transitions to her post as ECB president.


· The Euro may fall against the US Dollar after Italian Prime Minister Guiseppe Conte’s speech. Analysts are expecting for Mr. Conte to resign after relations between deputy prime ministers Matteo Salvini of the Lega Nord and Luigi di Maio of the Five Star Movement’s crumbled. The reintroduction of Italian political uncertainty is a bitter fruit markets may have to swallow against the backdrop of rising recession fears.




· USD/JPY holds in the newly acquired 106 territories, boosted again overnight in a risk-on environment where US stocks moved sharply higher. Technical indicators in the mentioned time-frame remain within positive levels.

The USD/JPY pair hast spent the last American session consolidating gains in the 106.50/60 region, maintaining a neutral stance in the short term, as, in the 4 hours chart, the 20 SMA has turned flat below the current level, while the 100 SMA maintains its bearish slope, approaching the mentioned Fibonacci resistance. Technical indicators in the mentioned time-frame remain within positive levels, lacking directional strength and off their daily highs.

Support levels: 106.05 105.60 105.25

Resistance levels: 106.65 106.95 107.20



· Boston Federal Reserve Bank President Eric Rosengren on Monday signaled no willingness to support further interest rate cuts, saying that U.S. economic conditions are still good and that easing policy could encourage a worrying debt build-up.

Rosengren was one of two dissenting votes at the U.S. central bank on its decision last month to cut borrowing costs for the first time since 2008. Now, he said, he does not currently see a need for any further action.

Markets overwhelmingly expect the Fed to cut rates again at its Sept. 17-18 policy meeting from the current 2.00%-2.25% target. Meanwhile, Fed Chairman Jerome Powell is slated to deliver a closely watched speech on Friday at a central bank conclave in Jackson Hole, Wyoming, where he is likely to weigh in on policy and his economic outlook.

· Germany's central bank is warning that the country could be slipping into recession.

The Bundesbank said Monday that Europe's largest economy "is probably set to remain lackluster in the third quarter of 2019." It predicts that GDP "could continue to fall slightly."

GDP for the three months ended June contracted 0.1% compared to the first quarter. A recession occurs when the economy shrinks for two consecutive quarters.

The Bundesbank said its gloomy outlook for GDP is "due mainly to the continued downturn in industry." Current data show industrial production further contracting this quarter, it said. Last quarter, industrial output fell more than 5% compared to the previous year.



· Japan has approved shipments of a high-tech material to South Korea for the second time since imposing export curbs last month, two people familiar with the matter said on Tuesday, ahead of talks this week to resolve the dispute.

Japan has approved shipments of a high-tech material to South Korea for the second time since imposing export curbs last month, two people familiar with the matter said on Tuesday, ahead of talks this week to resolve the dispute.

“Tokyo’s latest export approval is positive for the local industry, but I don’t see Japan’s move as a conciliatory message to South Korea,” a senior government official told Reuters, requesting anonymity because of the sensitivity of the matter.


· Korean Air says it will suspend more flights from South Korea to Japan, due to lower travel demand amid worsening bilateral ties between the two countries.

The airline said on Tuesday that it will fully suspend flights between the southern city of Busan and Japan's Kansai Airport in Osaka Prefecture from September.

From November, it plans to cancel flights between the southern resort island Jeju and Japan's Narita and Kansai airports.



· South Korean Vice Finance Minister says he is closely watching financial markets and possible risks to economic activity. He also said preemptive measures will be taken if necessary



· China’s new lending reference rate was set slightly lower on Tuesday in the first publication of the benchmark since the central bank announced interest rate reforms.

The People’s Bank of China published the first new Loan Prime Rate (LPR) under the new mechanism.

The new one-year Loan Prime Rate was set at 4.25%, down 6 basis points from 4.31% previously. It was 10 basis points lower than the PBOC’s existing benchmark one-year lending rate.

Tao Wang, chief China economist at UBS Investment Bank, said its impact is likely to be muted because credit demand in China is weak, and cheaper funding won’t be enough to encourage firms to spend more.



· The U.S. government’s decision to add more of Huawei’s affiliates to a blacklist is “unjust” and “politically motivated” and will not help the country advance its technological leadership, the Chinese telecommunications giant said in a statement.

U.S. Commerce Secretary Wilbur Ross announced Monday that it was extending by another 90 days a temporary reprieve for Huawei to continue doing business with American companies. The deadline had lapsed on Monday. However, the Bureau of Industry and Security (BIS) also added another 46 Huawei affiliates onto the blacklist.


· The leader of Italy’s ruling League party, Matteo Salvini, said on Tuesday that a 50 billion euro ($55 billion) budget is necessary next year to bring about a “shock” fiscal stimulus.

Salvini pulled the plug on the League’s coalition government with the anti-establishment 5-Star Movement this month, starting a potential countdown to elections which could complicate the nation’s preparations for the 2020 budget.



· Russia accused the United States on Tuesday of stoking military tensions by testing a ground-launched cruise missile, but said it would not be drawn into an arms race, TASS news agency reported.

The Pentagon said on Monday it had tested a conventionally-configured cruise missile that hit its target after more than 500 km (310 miles) of flight, its first such operation since the demise of a landmark Cold War-era nuclear pact this month.



· Crude oil prices edged up on Tuesday on optimism U.S.-China trade tensions will ease and on hopes major economies will take stimulus measures to ward off a potential economic slowdown that could hit oil demand.

Brent crude LCOc1 had risen 8 cents to $59.82 a barrel by 0652 GMT, after climbing 1.88% on Monday.

U.S. crude CLc1 was up 9 cents at $56.30 a barrel, after gaining 2.44% in the previous session.

Reference: CNBC, Reuters, FX Street, Daily FX