08/ 10/ 2019

Focus Remains on Trade and Brexit

The major Asia Pacific stock indexes finished mixed on Monday as investors shifted their focus away from the U.S. economy and on to the renewed U.S.-China trade negotiations that begin later this week after talks collapsed five months ago. Ahead of the talks gains were capped after Bloomberg reported that Chinese officials are growing hesitant to pursue a broad deal with the United States.

Focus this week will turn to the 13th round of high-level trade talks between the US and China taking place in Washington on Thursday and Friday. If we get an interim deal we expect a short-term relief in equity markets, see US-China Trade - 60% probability of an interim deal. On the other hand, a failure to reach such a deal should put risk appetite under pressure again as US tariffs on USD250bn of Chinese goods are then set to move up from 25% to 30%. Minutes from the latest Fed meeting will be scrutinized on Wednesday as will a number of Fed speeches. The Fed is set to meet again on 31 October and markets price around 75% probability of a rate cut following the weak data last week.

Another important topic to follow will be the development in the Brexit drama. French President Macron has said negotiations must be concluded by the end of this week (same signals were sent by EU ambassadors last week). ECB minutes on Thursday will give more insights into the ECB easing package, which as it turned out came with significant disagreement within the ECB Governing Council.

07/ 10/ 2019

Week Ahead | Geopolitics, Trade Talks and FOMC Member Chatter in Focus

The greenback ended last week generally lower, except versus Swiss Franc and Canadian Dollar. It was pressured as poor economic data raised recessions fears while traders added to bet of Fed cut this month. Yen was the strongest one, but its upside was limited by strong rebound in stocks towards the end. Sterling and Euro were the next strongest, awaiting Brexit developments.

Economic data is on the lighter side in the week ahead. While we can expect the figures to provide direction, geopolitics will continue to influence on the day. Any progress on Brexit negotiations would be a positive, though there is also trade war chatter to consider.

While the U.S – China negotiations are due to resume this week, any further threat of tariffs on EU goods would likely overshadow any positive Brexit news.

03/ 10/ 2019

All Eyes on UK Services PMI, Politics and Non-Farm Payroll

Yen remains generally firm in Asian session today as risk aversion dominates. Selloff in US stocks overnight spilled over to other markets. Poor economic data, manufacturing and employment, raised recession concerns. Additionally, US is taking another step in global trade war, by raising tariffs on EU after WTO ruling on Airbus subsidies. Meanwhile, Yen is currently the strongest one for the week, followed by Euro and then Pound.

It’s a busy day ahead on the Eurozone economic calendar. Spain and Italy’s service sector PMI numbers for September are due out, along with the Eurozone’s retail sales figures. We can expect these numbers to have the greatest impact on the day. Following disappointing manufacturing numbers, any downward trend in service sector activity and consumer spending will weigh. From the U.S, the market’s preferred ISM non-manufacturing PMI and factory orders will also have an impact on the European majors. On the geopolitical front, the EU reaction to Boris Johnson’s Brexit plans will also be in focus.

02/ 10/ 2019

Dollar Rally Halted, Focus Turns to ADP Jobs & Brexit Update

The euro gained against the U.S. dollar on Tuesday, as dollar pared gains following the U.S. manufacturing data. The greenback was the strongest until mid-US session, when the country released the September ISM Manufacturing PMI, which unexpectedly fell further into contraction territory. The American dollar came under selling pressure, shedding ground unevenly across the board amid fears that the latest Fed’s rate cut is not enough to support the economy, and more action should be taken.

Britain's pound steadied against the dollar, as Investors eyed Johnson's Brexit plans. More than three years since the 2016 referendum, the United Kingdom is heading towards an Oct. 31 exit date without a clear understanding of whether it will leave with a deal, without a deal or even leave by that deadline.

There were no material stats to provide direction through the day, leaving the markets to respond to overnight private sector PMIs from the U.S. Particularly weak PMIs weighed on risk sentiment through the early part of the session. Economic calendar leaves geopolitics in focus. Boris Johnson is set to deliver the Irish backstop alternatives to the EU.