Despite Japanese traders away on a holiday, the market mood in Asia at the start of the week this Monday remained buoyed by the latest optimism on the US-China trade talks, with both the teams hailing “enormous progress” toward reaching a “phase one” agreement.
Therefore, markets ignored disappointing Australian and New Zealand’s macro news, in turn sending the Antipodeans sharply higher. The Kiwi outperformed across the G10 currencies, especially after the report that New Zealand is said to have agreed to the upgraded free-trade agreement with China. NZD/USD jumped to reach fresh four-month tops at 0.6463 while the Aussie flirted with the October highs of 0.6930.
The safe-haven Yen remained under pressure amid risk-on action in the Asian equities that hit 14-week highs, but USD/JPY failed to benefit and remained stuck around 108.20 region amid broad-based US dollar weakness. Other safe-havens such as Gold and Swiss franc also felt the heat from the better risk environment. Meanwhile, both crude benchmarks ticked lower after Friday’s upsurge.
Heading into Europe, both the European currencies, the EUR/USD and Cable are trading little changed, awaiting fresh impetus from the upcoming macro-economic releases.
Main Topics in Asia
Hungarian central bank Governor Matolcsy: We need to admit the euro was a mistake – FT
US Commerce Sec. Ross: US may not need to impose auto tariffs this month – Bloomberg
US Commerce Secretary Ross: We are very far along in trade talks with China
China’s Pres. Xi: China will promote globalization of Shanghai’s financial markets
US Pres. Trump: UK PM Johnson and Brexit Party leader Farage to unite – Reuters
Australian TD Securities Inflation arrived at +1.5% YoY in October
Australia’s Retail Sales rise 0.2% in Sept, meet estimates
Japan’s Motegi sees progress on end to US car tariffs – FT
NZ Treasury sees downside risks to economic forecasts
Asian stocks rise on US-China trade optimism
New Zealand said to have agreed to upgraded free-trade agreement with China
US Envoy: US Pres. Trump invites Southeast Asian leaders to visit US for a special summit
S. Korean Pres. Moon-Japan’s PM Abe back dialogue to resolve the trade row – Reuters
Key Focus Ahead
We have a busy EUR calendar ahead, with the Swiss Government Economic Forecasts dropping in at 0645 GMT, following by a slew of the Euro area Final Manufacturing PMI reports for October. Also, at 0930 GMT, both the UK Construction PMI and Eurozone Sentix Investor Confidence data will grab some attention.
Next of relevance is the US Factory Orders data due on the cards at 1500 GMT among other minority reports. The main focus remains on the European Central Bank (ECB) President Lagarde’s debut speech, due at 1830 GMT, for fresh hints on the bloc’s monetary policy. Meanwhile, traders will keep a close eye on the Brexit and trade-related headlines as well.
EUR/USD: Trade optimism may bolster bullish setup
EUR/USD is better bid following Friday’s bullish hammer candle. The US-China trade optimism could yield a test of the 200-day average resistance. On the data front, the focus is on the Eurozone Sentix Investor Confidence and the US Factory Orders.
GBP/USD: Mildly bid ahead of UK PMI, trade/Brexit headlines in play
GBP/USD stays mostly positive amid receding threats of no-deal Brexit. Tories lead in early-election polls, risk-on stays on the cards. The UK Construction PMI, US factory Orders to decorate the economic calendar.
Week Ahead: RBA, BoE and plenty of macro data
As laid out below, there will be plenty of important macro data to look forward to for currency traders next week, which should provide pockets of elevated volatility here and there.
GBP/USD Forecast: Boom and bust on Boris’ re-elections chances, and also watch the BOE
Prime Minister Boris Johnson has not died in a ditch – and he even leads the polls – after the October 31 deadline came and went. The focus turns to the December 12 elections with some impact reserved for the Bank of England’s “Super Thursday.”
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