2 days after Ashraf posted an-all clear video on the US dollar to subscribers, a broadening sell-off in the US dollar is underway after heightened divergences on Wednesday, but a trend of outperformance in commodity FX emerged on a combination of trade and global growth optimism. USDX breaks to 4-week lows below the 100-DMA for the 1st time since April. CAD drags USD below 1.29 and the Premium short in USDCAD has been closed with 140-pip gain. A detailed note has been sent to subscribers regarding what's ahead for USDCAD. GBP is the biggest outperformer on higher than expected retail sales, while the NZD is the 2nd highest performer of the day after a GDP beat. US jobless claims and existing home sales are next.
US economic data included a nearly 10% rebound in US housing starts after two months of weakness. They were at a 1282K pace compared to 1238K expected. In the bigger picture, the market is signaling better global growth; or at least the ability to weather the latest flare-up in the China-US trade war. The optimistic signals have been undeniable despite worrisome US and China moves and ultimately, there's no arguing with the market, at least in the short term.
Could the broad USD decline be a usual reflection of the broad pick-up in global growth dynamics, which argues for more upside in non-Fed tightening in the course ahead? Yes, the Fed is expected to raise at least 4 more times (including 2 this year)...but let's revisit this assessment in November..as we near the December meeting.
NAFTA negotiators didn't make any kind of breakthough and headlines about no deal this week briefly hurt the loonie but USD/CAD finished on the lows in part because of report the US was ready to bend on Buy America provisions.
The Australian and New Zealand dollars are also making solid gains. To underscore the better sentiment on growth, Japan's Nikkei 225 has risen more than 1% for four straight sessions.