FX News Today
- US yields corrected slightly from yesterday’s highs. Asian bond markets remained under pressure, while stock markets traded mixed with conflicting trade headlines making for a jumpy session.
- Bloomberg reported that the US is weighing to agree to a previously hammered out currency pact as a team of Chinese negotiators, including Vice Premier Liu He arrived in Washington.
- There were also reports in the US that the Trump administration will grant licences that would allow US firms to sell no sensitive supplies to Huawei.
- US stock futures are in red, with the headlines accompanying the trade talks, likely to keep markets volatile and jittery.
- GER30 and UK100 futures are slightly higher, though, with Brexit developments in focus as UK PM Johnson is travelling to Ireland in search for a breakthrough on the Irish border conundrum.
- German trade surplus declined as exports dropped -1.8% m/m in August.
- ECB’s Rehn plays down divisions at ECB, banks on Lagarde to heal the rift. The Governing Council member said the FT story that said Draghi ignored advice from his own officials to push through the restart of asset purchases was “greatly exaggerated”, adding that Lagarde’s team-building ability should help to bridge the splits at the council.
- The WTI future fell back to $52.54 per barrel.
Charts of the day
- EURUSD rally above 1.099 in the European open. The 1.1000 level remains key for EURUSD, with Wednesday marking the fifth consecutive session that EURUSD has tried and failed to break through the level. A decisive close above this level could strengthen the positive bias for EUR.
- USDJPY was a bit stronger through the Asia session, rallying to 107.76 highs, and remaining above the 107.40 since then. Better risk taking levels brought buyers in, as hopes for progress on the US/China trade war got a lift into Thursday’s high-level meetings in Washington. China said that it was open to a partial trade agreement. Given the history of the talks however, a smooth outcome is anything but guaranteed, and Yen bears will have to remain on their toes.
- USDCAD headed to 1.3310 down from Asian highs of 1.3344. The modest sell-off came as oil prices rallied on news there may be some progress on the US-China trade front. The 200-day moving average at 1.3288 remains a good support level, with the pairing holding above the level for nearly a week now. Further oil price gains could see a break though, with the next downside target being the 1.3260-70 region.
Main Macro Events Today
- Gross Domestic Product and Manufacturing Production (GBP, GMT 08:30) – GDP is the economy’s most important figure. August’s GDP is expected to lower to 0% following the 0.3% reading from last month. Meanwhile, Industrial and Manufacturing Production will be out as well. These two indices are expected to have fallen, with both providing a downwards contribution of 0.1% m/m in August.
- ECB Monetary Policy Meeting Accounts (EUR, GMT 11:30) – Event of the Week –The ECB Monetary Policy Meeting Accounts, similar to the FOMC minutes, provide information with regards to the policymakers’ rationale behind their decisions. In the last ECB meeting, ECB not only cut the deposit rate but also announced a new open-ended asset purchase program, worth EUR 20 bln a month, while removing the time frame in the rate guidance.
- Consumer Price Index ex Energy and Food (USD, GMT 12:30) – The Consumer Price Index is suggestive of how the economy is performing, with expectations standing flat for the September headline release. A 0.2% core price increase is expected, following respective August readings of 0.1% and 0.3%.
Support and Resistance levels
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