29/ 10/ 2019

Trade Optimism Boost the Dollar against Rivals & Fed Minutes takes Center Stage

Both the dollar and riskier Asian currencies held on to modest overnight gains on Monday Evening, amid hopes for an easing in Sino-U.S. trade tensions and as investors waited for direction from this week’s Federal Reserve meeting. U.S. President Donald Trump said a trade agreement looked to be ahead of schedule on Monday, without detailing the timing, while the U.S. also said it was studying whether to extend tariff suspensions due to expire in December. That followed remarks late last week from both U.S. and Chinese officials saying they were “close to finalizing” a deal that lifted trade-exposed currencies such as the Australian dollar, while weighing on safe-havens such as the Japanese yen.

Beyond the trade headlines, the major focus this week is the Fed meeting. The U.S. central bank is expected to cut rates for a third time in a row when it concludes its two-day meeting on Wednesday. Investors are watching for any indication that further cuts are likely, with futures pricing suggesting an expectation for further easing in 2020.

Today’s focus will be around AUD RBA Minutes, German Buba Weidmann’s Speech, US Consumer Confidence & Pending Home Sales

28/ 10/ 2019

Week Ahead | US-China, Brexit in Focus with FED Third Rate Cut on the Table

US Dollars ended last week as the strongest ones. It now appears that US and China are on track to complete the easier phase 1 trade deal in November. Meanwhile, Sterling ended and dragged down other European majors. Brexit developments were positive as the Commons finally voted to support UK Prime Minister Boris Johnson’s Brexit deal in principle. Yet, MPs couldn’t agree to a fast track path to ratify the deal to meet the October 31 Brexit deadline. EU is said to agree to another Brexit extension, but hold back to the announcement, awaiting UK’s vote on a December election, which Johnson called for. But opposition Labour was clear that they won’t support an election unless no-deal Brexit is clearly ruled out. French President Emmanuel Macron was said to push for a short extension, at most month, to complete Brexit as soon as possible. The developments in the upcoming days remain fluid.

Looking ahead, it’s a quiet day ahead on the Eurozone economic calendar. There are no material stats on the day to provide the majors with direction. From the U.S September’s goods trade data is unlikely to influence later in the day, leaving the majors in the hands of sentiment towards monetary policy and Brexit. While the markets will be looking ahead to the FED’s interest rate decision on Wednesday, ECB President Draghi is scheduled to speak at the end of the session. Following last week’s press conference, however, there’s unlikely to be too much influence.

On the geopolitical risk front, both Beijing and Washington will need to continue to deliver positive messages to support the majors. Brexit will likely take center stage in the early part of the week, following the EU’s delaying of its Brexit extension decision until this week. While an extension was agreed by the 27 member states, the length of the extension and structure was in debate.

24/ 10/ 2019

Pound on Pause as Brexit Extension Awaits

The euro strengthened against the U.S. dollar on Wednesday after EU leaders considered whether to give Britain a three-month Brexit extension. Prime Minister Boris Johnson said that if they do so he would call an election by Christmas. However, there are still plenty of hurdles left, and Johnson’s ability to deliver on a “do or die” pledge to get Britain out of the EU by Oct. 31 is in doubt, after parliament rejected a three-day timetable to enact his agreement. Meanwhile, sterling edged higher against dollar  as EU leaders consider Britain’s request for a Brexit delay, and are expected to grant a three-month extension to the Oct. 31 deadline for its departure. The dollar strengthened  against the Japanese yen amid cheery chatter about the chance of a Sino-U.S. trade deal, while investors were sanguine yet another vote on Brexit would still avert a hard exit for the UK. 

It’s a busy day ahead for the European majors. Private sector PMIs, corporate earnings, and Brexit are in focus. The EU needs to deliver on the extension.

23/ 10/ 2019

Brexit Confusion Weighs on Pound, Dents Risk Appetite

The euro little changed against dollar on Tuesday, as traders waited for the British parliament to vote on the Withdrawal Agreement Bill as it will shine light on when and how Britain will exit the EU. The UK is expected to leave the EU on Oct. 31, but the deal Prime Minister Boris Johnson and his European counterparts agreed last week has not been yet voted on in the Britain’s parliament, which forced Johnson to request an extension to the leaving date from Brussels. The euro was flat at $1.1133 after rising to a two-month high against the dollar on Monday.

The British pound fell against the dollar and the euro after UK lawmakers on Tuesday rejected the government’s proposed timetable for passing legislation to ratify its Brexit deal. The dollar weakened against the Japanese yen as cautious investors adopted a cautious approach ahead of a crucial Brexit vote. British Prime Minister Boris Johnson faces two pivotal votes in parliament that will decide whether he can deliver on his pledge to lead Britain out of the EU in nine days’ time.

It’s another quiet day ahead on the Eurozone economic calendar. The lack of stats will leave the markets to continue to respond to events in the UK parliament. While a no-deal Brexit remains unlikely, talk of a general election could test risk sentiment.