US deal fails to support peso
By Peter Rosenstreich
As the gongs sounded of a US-Mexico trade deal, broad USD selling slowed while Mexican peso rose, yet MXN was unable to hold high ground. While the downside risk of a failed agreement has decreased, confusion has increased. For now, risky assets and emerging currencies are attractive, but ultimately they will need yield support.
Trump is hailing the Mexican agreement as the biggest trade deal ever. Canada has returned to the table, saying the door is open for agreement. Markets immediate reaction was of optimism, sending the S&P 500 to a new all-time high.
Aussie slips
By Arnaud Masset
The Australian dollar slid as low as $0.7299 after Westpac, one of Australia’s largest lenders, announced it would lift its variable mortgage interest rates. This triggered selling in the Aussie: investors anticipate it would negatively affect economic growth. The decision will also keep the central bank side-lined for longer. 2-year sovereign yield dropped more than 4 basis points to 1.97%, its lowest since late May as traders lowered their expectations on timing of the next rate hike. It may take longer before AUD/USD gets back to $0.80.
The US dollar was better bid against most of its peers as global stocks treaded water. The dollar index edged up 0.05% to 94.78 as the single currency tumbled on the 1.17 resistance, while the Australian dollar fell most within the G10 complex, down 0.40% on the session. Despite key economic data due for release later today, investors will focus on NAFTA’s revamp. The big question is whether Canada will follow Mexico’s footsteps and accept the Trump amendments. The loonie and the yen were the only G10 currencies to edge higher against the dollar.