Growth worries sustain for markets

While some positive news on trade were seen across the wires, the contempt as shown through the bond market keeps a lid on optimism.

Currency war unlikely for now

Wall Street picked up a fair bit overnight despite the lack of strong drivers. One would have noted President Donald Trump’s continued criticisms on the Federal Reserve, accusing the central bank of being unable to ‘keep up with the competition’, though that was seen doing little for the market or to put off the climb for the US dollar index.

To some extent, the improvement in risk sentiment had been aided by US treasury secretary Steven Mnuchin’s remarks, both on the fact that the US do not intend to intervene in the currency market and the trade meeting with China will happen. That said, no timing had been specified as we close in on the September 1 tariffs exchange date, keeping this waiting game going. USD/JPY (大口） traded moderately higher overnight at around $106 levels below dipping just below the level as we pen this. US indices, the likes of the comprehensive S&P 500 index, is sustaining in the consolidation without so much of a direction at present. As told above, the contempt from the bond market continues to be reflected with the depressed yields for the likes of US 10-year treasuries.

Elevated no-deal Brexit risks

Notably on FX, the focus had been on GBP with the heightened risks of a no-deal Brexit. In what seemed like guerrilla warfare, British Prime Minister Boris Johnson had managed to seek approval of the suspension of parliament with a reopening date close to the October 31 Brexit deadline, cornering the country into leaving the EU and likely without a deal judging by the situation on hand. The likelihood of a hard Brexit at present once again puts the bias on the downside for GBP with prices having fallen to $1.22 levels against the US dollar following the news. This is despite the inverse head and shoulder pattern that should rightly suggest reversal. While fellow lawmakers can be seen voicing dissent, both the potential for further Brexit extension or another no-confidence vote looks to only further complicate the situation and implicate the currency.

Source: IG Charts

Asia open

Against the mixed backdrop above, Asia markets look once again likely to muddle along awaiting fresh leads. Early movers in the region including the likes of the ASX 200 and the Nikkei 225 can both be seen slipping 0.2% awaiting the open for the rest of Asia markets. The rise in greenback strength will be one worth watching in the day that could place further pressure on the Asia region. Japan and the eurozone’s consumer confidence figures will be items to watch in addition to Q2 GDP out of both the US and eurozone for the day in a data filled day.

Yesterday: S&P 500 +0.65%; DJIA +1.00%; DAX -0.25%; FTSE -0.35%