Weakness in the dollar, stocks and oil were all in evidence on Friday as the market prepared for the weekend Brexit vote, with Cable mostly rangebound but ending the week on a solid note at just under 1.3000. Moves were generally small, with the DXY down by 0.4%, as the EU majors made some positive ground, allowing the Euro to reach a new 2 month high against the dollar. While the US$ was not helped last week, because of increasing expectations for October Fed cut after some recent weak economic data from the US, the Aud$ and Nzd$ also performed well on Friday, helped along by some positive Chinese Industrial Production/Retail Sales data, outweighing the fact that the China Q3 GDP slowed to 6%, the lowest growth levels in 27 years. US stocks were weighed down by sharp falls on the back of negative headlines from Boeing and Johnson & Johnson, while WTI reversed the gains of the previous session by falling on Friday as the choppy conditions continue. WTI was not helped by data from the EIA, which showed that crude stockpiles grew by 9.3 million barrels last week, more than triple expectations, but with traders also closely focused on various political tensions around the world and the possible ramifications that they may have on the outlook for global economic growth.
The weekend Brexit vote never actually went ahead. Instead, the UK parliament voted to delay that vote and forced the UK PM to ask the EU to grant a Brexit extension through to February 2020, which has seen Cable open a little lower on Monday morning in early Asian trade as the never-ending stand-off continues. The original 31st October Brexit date is 10 days away and it may be that the UK now leaves the EU on a no-deal outcome although this looks unlikely but we shall have to wait and see again!
Looking ahead, in the absence of too much data it will be political headlines that dominate trade in the coming week although there are a couple of major items on the agenda. Interest Rate Decisions will be seen from the PBOC (Mon) and the ECB (Thur). We get the 1 and 5 year prime loan rates out of China, while the ECB is expected to stay on hold for now but is likely to cut the deposit rate to -0.60% in Quarter 1 2020. Otherwise the calendar is rather threadbare until Thursday, when the global flash PMIs are due, kicking off in Asia with those of Australia and Japan, and to be followed by Europe and the US. Other than that it is very thin on the ground, and aside from today’s PBOC decision there is very little of note, which is possibly just as well as traders figure out what happens next with Brexit.
Economic data highlights will include:
Mon: Japan Trade Balance, All Industry Activity Index, China House Price Index , PBOC Interest Rate Decision, NZ Credit Card Spending, German PPI, BOE Haldane Speech
Tue: Japan Bank Holiday, ECB Lending Survey, UK Public Sector Net Borrowing Requirements, CBI Distributive Trade Survey – Trends, US Existing Home Sales, Richmond Fed Mfg Index, API Weekly Crude Oil Stock Inventory, Canada General Election
Wed: NZ Trade Balance, EU Consumer Confidence, US House Price Index, EIA Crude Oil Stocks Weekly Change
Thur: Global Mfg/Services/Composite PMIs, ECB Interest Rate Decision/Press Conference, US Durable Goods Orders, New Home Sales, Kansas Fed Mfg Activity, Jobless Claims
Fri: German Consumer Confidence, German IFO Business Climate/Expectations, CBI Distributive Trade Survey – Realised, Michigan Consumer Sentiment Index
Market moves, in brief:
FX: DXY 97.14 (-0.4%)
Bonds: US10Y; 1.757% (-0.05%), German 10Y; -0.386% (+4.65%), UK 10Y; +0.628% (+2.83%), Australian 10Y; 1.117% (+0.47%), NZ 10Y; 1.246% (+2.82 %), China 10Y; 3.178% (+0.47%)
Stock Indices: DJI; -0.95%, S+P; -0.39%, NASDAQ; -0.83%, EUStoxx50; -0.26%, FTSE100; -0.44%, Shanghai Composite; -1.32%,
Metals: Gold $1490 oz (+0.02%), Silver $17.55 oz (+0.02%), Copper $2.635 lb (+1.48%), Iron Ore $90.76 per tonne (NYMEX) (+0.83%),
Oil: WTI $53.67 pb (-0.78%)
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