The US$ is under pressure n Friday, while stocks are higher on renewed hopes that the top-level US/China trade talks may yield at least a partial deal, and the positive mood received a further boost after Donald Trump tweeted that he will meet Chinese Vice Premier, Liu He, on Friday for further negotiations. It was a volatile ride in the FX markets on Thursday, beginning yesterday in Asia, when the Aud$ and the Nzd$ jumped after Bloomberg reported that the US was looking at the inclusion of a currency agreement with China in a partial trade deal. Later on, EurUsd rallied back above 1.1000 after the ECB Minutes confirmed the divided opinion among ECB policy makers on how to stimulate the EU economy, particularly with regard to using Quantative Easing. Then Sterling soared by almost 300 bp after UK PM, Boris Johnson and Irish PM, Leo Varadkar surprised almost everyone when they jointly announced that they ‘see a pathway’ to a Brexit deal. We shall see!
Overall it was a positive risk day, so in addition to the 0.5% rally in the stockmarkets, ahead of today’s trade negotiations, the funding currencies, Jpy and the Chf, were under pressure, while the metals were lower, (-0.75%/1.25%) as safe haven demand diminished – for now! WTI joined in and ended the day +0.5% on hopes of a positive outcome from the trade talks. Expect plenty more headlines heading into the weekend.
The calendar suggests a quiet end to the week – although the Euro may see some action, – with US/China trade headlines likely to be the driver of any directional price action. There is a bit of secondary data due from NZ/Australia, including the NZ Business PMI (exp 49.0), the Electronic Card Retail Sales (exp +0.5%mm – August) and then the Australian Investment Lending for Homes for August and the Financial Stability Review. Later on the German CPI will be due, which may create some volatility in the Euro (CPI, exp 0.0%mm, +1.2%yy; HICP, exp 0.9%yy), while Mario Draghi will be speaking, as will the ECB’s de Guindos. The US will have a thin calendar, with the Preliminary Michigan Consumer Sentiment Index being the highlight (exp 92.0), along with Fed speakers Rosengren and Kaplan.
Economic data highlights will include:
Fri: NZ Business PMI, Electronic Card Retail Sales, Australian Investment Lending for Homes, Financial Stability Report, EU EcoFin Meeting, German CPI/HICP, ECB Speakers; Draghi/De Guindos, US Import/Export Index, Michigan Consumer Sentiment Index, Fed Speakers; Rosengren/Kaplan
Market moves, in brief:
FX: DXY 98.70 (-0.42%)
Bonds: US10Y; 1.660% (+4.70%), German 10Y; -0.478% (+13.90%), UK 10Y; +0.481% (+28.52%), Australian 10Y; 0.906% (+2.25%), NZ 10Y; 1.057% (+3.20 %), China 10Y; 3.117% (-0.09%)
Stock Indices: DJI; +0.56%, S+P; +0.56%, NASDAQ; +0.62%, EUStoxx50; +0.92%, FTSE100; +0.28%, Shanghai Composite; +0.78%,
Metals: Gold $1494 oz (-0.75%), Silver $17.52 oz (-1.21%), Copper $2.6095 lb (+1.62%), Iron Ore $93.01 per tonne (NYMEX) (+1.55%),
Oil: WTI $53.67 pb (+2.05%)
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