Morning Commentary & Currency Insights – July 25, 2018

The Dollar Index is down this morning ahead of the meeting between the US and EU in Washington later today as trade tensions continue to heighten. Trump will be hosting the President of the European Commission, Jean-Claude Juncker as the EU attempts to defuse the escalating trade concerns over tariffs between the US and Europe. Trump Tweeted that the US and the EU should drop all tariffs and barriers ahead of the scheduled meeting, but also included that the EU won’t and that there is little hope for such an outcome. If the US proceeds with the $50B auto tariffs planned for the Eurozone, the EU will retaliate swiftly and accordingly. NAFTA negotiations started up again following the conclusion of the Mexican Presidential elections. Canadian Foreign Affairs Minister Freeland will be meeting in Mexico today with the old and new Mexican administrations.

EUR inched higher but is still training within range against the Dollar as Trump and Juncker meet today and leading into tomorrow’s ECB Interest Rate Decision where investors will be looking for an update on monetary policy. As previously stated, the ECB indicated that rates would remain stagnant into mid-late 2019. Sterling is seeing support as Theresa May has assumed responsibility for negotiating a Brexit policy with the EU, seemingly limiting the UK’s Brexit department of government’s involvement as previous negotiations have been heavily scrutinized. While May has always been involved in dialogue, this appears to be an attempt to shake up public perception and investors have gone for the bait with GBPUSD moving away from the nine-month lows we saw last week.

Juncker will speak later this afternoon on EU-US Relations which could provide noteworthy information on the current relationship between the EU and US. New Home Sales (669k vs 689k) and Crude Oil Inventories will act as secondary data for the US this morning. The ECB Rate Decision will be the highlight tomorrow with US Advanced Goods Trade Balance (-$66.6B vs -$64.8B) following about an hour later. US GDP (4.2% vs 2.0%) will round out the week. Short term support and resistance remain at 1.3065 and 1.3220 as we continue to be rangebound, with RSI at 58 and the 200-day moving average residing at 1.2807.