Article Highlights

  • Canadian CPI m/m: 0.1% vs. 0.1% forecast, 0.2% previous; y/y at 1.3% vs. 1.3% forecast, 1% previous
  • Canadian Core CPI: m/m: inline with 0.0% forecast/previous; y/y at 2.4% vs. 2.4% forecast, 2.3% previous
  • Canadian Retail Sales m/m: 0.6% vs. 0.2% forecast, 0.9% previous
  • Canadian Core Retail Sales y/y: 0.8% vs. 0.5% forecast, 0.8% previous
  • U.S. Flash Manufacturing PMI: 52.9 vs. 53.8 forecast/previous
  • European Flash Consumer Sentiment: -6.8 vs. -6.9 forecast, -7.1 previous
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Global growth concerns was the main driver of price action in the Friday U.S. session, with the selling of risk assets intensifying in the U.S. equities market (S&P 500 dropped -3.19% to 1,970.89; DJIA dropped -3.12% to 16,459.75). In the forex market, this typically means selling out of the high-yielders and buying back the low-yielders, or “safe haven” currencies.

The Japanese yen and Swiss franc fit in the latter category, so it’s no surprise that we saw big gains from both against the rest of the majors on the session.  And considering Australia’s strong trade ties with China and the commodities market, it’s also no surprise that AUD/CHF and AUD/JPY had the biggest down moves on the session. From the start of the U.S. trading session, AUD/JPY dropped an additional 90 pips (-1.01%) to a low of 89.17, and AUD/CHF dropped a big 107 pips (-1.53%) to a low of .6909

The U.S. dollar also took a broad hit, not only from the big outflow out of U.S. equities, but also on some concern that this global growth concern may sway the Federal Reserve to hold off on a September rate cut. USD/JPY closed the day down -133 pips (-1.08%) to 122.01, and USD/CHF dropped 127 pips (-1.33%) to a low of .9454

The euro saw some decent gains in the U.S. trading session, likely on a mixed, but relatively positive set of PMI news released during the morning London session, and likely on USD weakness. EUR/USD rose 115 pips higher (+1.03%) to nearly reach the 1.1400 handle while EUR/GBP popped up by 65 pips (+0.91%) to .7257

Finally, we did get economic data from North America, with the top tier events coming from Canadian.  There was a big positive surprise from Canadian retail sales, but unfortunately for the C$ bulls, the Loonie didn’t stand a chance against global risk sentiment, especially as oil (Canada’s largest export sector) took another blow heading into the weekend (WTI Crude down -2.11% on Friday to $40.45/bbl). Paired against the “safe havens,” we probably saw the biggest losers of the day in CAD/JPY and CAD/CHF:

CAD/JPY fell by 173 pips (-1.83%) to 94.93 on the session, meanwhile, CAD/CHF fell by 24 pips (-0.14%) to 1.7813 and EUR/CAD dipped by 18 pips (-0.12%) to 1.4546.

Will the big spike in volatility stay elevated? Based on this week’s forex calendar, we may not get much from economic data with only a few top tier data set to release.  And for today, the calendar is light with only Japanese leading indicator data (107.2 prev.) and RBNZ inflation expectations (1.85%) in the pipeline. Keep an eye out for both to spark price action for the week in their respective currencies, and also keep an eye out for any surprise news from China to dictate how sentiment may behave as we get the new trading week started. Stay frosty!

See also:

London Session Recap

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