Pound lags as risks of no-deal Brexit rise, retail bias rises a notch to long 75%
Safe Haven outperforms as trade talk hopes fall, while both pound and euro lag on rising no-deal Brexit risks.
EUR/USD: Euro and pound lag as no-deal Brexit risks rise
It was a surprise (and small) growth for German industrial production, but certainly not enough to shift the mood from an expected recession given the contraction in manufacturing. Elsewhere France's trade deficit worsened, though as it stands attention will be on tonight's US Federal Open Market Committee (FOMC) minutes release to get a better glimpse of how divided members were regarding last month's rate cut, with the Federal Reserve (Fed) Chairman Powell saying yesterday that the US economic expansion was ‘sustainable’, and would allow its balance sheet to expand without mentioning quantitative easing. Both pound and euro lagged heavily as no-deal Brexit risk rise, but rate cut likelihoods are rising out of the US and could result in a weaker greenback.
GBP/USD: Lagging the most amongst the FX majors as political woes fail to subside
The pound was in for a shock yesterday following news that sources said that the Brexit deal was in German Chancellor Merkel's words ‘essentially impossible not just now but ever,’ and with the latest Brexit news suggesting there may be cabinet resignations within the UK government. That might keep the pound relatively volatile, but keep in mind that a lack of economic today out of the UK (and most places) will mean investor focus will be on tonight's US Federal Reserve (Fed) minutes, but with significant UK data tomorrow followed by the Bank of England's (BoE) governor Carney speaking. Little is needed at this stage to shift to an initializing bear trend with a negative DMI cross occurring yesterday and its price crossing below its 50-day moving average, but the catalyst has been fundamental and hence any further Brexit talk could cause a shift in either direction and entice breakout strategies over fading and reversal ones.
USD/JPY: Safe haven rises as trade deal likelihoods drop on tit-for-tat US-Chinese actions
Safe haven currencies relatively outperformed with the Swiss franc taking the top spot but with the yen not that far off. However, with the US dollar also outperforming against most of the remaining FX majors, and the net result was a smaller than expected price drop that is below all its main short-term moving averages (MA) and just above its 50-day MA. US-China trade talks begin tomorrow and ahead of US planned tariff hikes on Chinese imports set to go into effect on October 15, with risk-off/on plays set to occur depending on any rumors or news emanating from the meetings. Light Japanese data this morning with preliminary machine tool orders, and hence the schedule is clear thereafter for tonight's Fed minutes and any response from risk appetite.
USD/CAD: Canadian dollar underperforms as energy prices plummet
While Canadian data didn’t disappoint yesterday with housing starts above expectations but worse than previous, and building permits rising at a far better than expected rate of 6.1% following last month's 3% expansion, it was it’s energy underlying that dropped on a worsening exchange between the US and China reducing the likelihood of a trade deal this week that ensured its underperformance was only bested by the pound and euro. And both sides of This pair are set to get affected tonight with the USD aspect via the Fed’s minutes release tonight and CAD with Energy Information Agency’s (EIA) US crude oil inventories release.
AUD/USD: Finishing lower following intraday consolidation
The moves thus far have been in line with its current consolidatory technical overview that’s showing ongoing negative bias with its price below all its main moving averages and where its weekly bear trend channel continues to hold. There's little data today prior to the Fed's release, and Australia's Westpac consumer sentiment figure showed contraction at a faster pace than last month following National Australia Bank Limited's (NAB) business confidence drop yesterday morning. After tonight's minutes and attention will shift back to US-China trade talks, and the effect on risk and the commodities markets should any news be announced.
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