Forex today witnessed a dramatic start to a big week ahead, as the renewed Brexit jitters saw the British currency opening gap down. Amidst Brexit stress and trade war fears, other higher-yielding assets also took a hit while the Yen and gold prices remained supported. USD/JPY is on the back foot just under the 111 handle amid negative Asian equities and oil prices. The Aussie made minor-recovery attempts, having hit fresh 20-month lows of 0.7167 on Australia’s retail sales miss while sluggish Chinese Caixin manufacturing PMI data also The Pound kept losses near 1.2920 levels while broad-based US dollar consolidation helped put a bid under the common-currency.
Main topics in Asia
UK PM May: Will not surrender to Brussels – The Telegraph
Brexit negotiations are once again seeing both sides quickly coming to loggerheads over trade agreements for the United Kingdom post-Brexit, “¦
Tough talk from Barnier send sterling lower in early Asia on a busy week ahead
The pound has gapped lower at the open some 50 pips, (1.2954 close to a low of 1.2907), on headlines from the weekend that he said he was “strongly opposed” to Theresa May’s Chequers proposals on future trade.
UK Brexit Secretary Raab: expecting a Brexit deal, but prepping for none – Reuters
In a video report by Reuters, the UK’s Brexit secretary Dominic Raab is trying to push a more hopeful tone to Brexit proceedings heading into the new week after the weekend saw a flurry of tit-for-tat across headlines.
Australia retail sales drop to 0.0% in July, below estimates
Australia’s consumption, as represented by retail sales, dropped in the month of July, missing estimates, the Australian Bureau of Statistics (ABS) reported on Monday.
China’s Caixin Manufacturing PMI eases to 50.6 in July, matches estimates
China’s July Caixin manufacturing PMI came in at 50.6 vs. 50.6 expected and 50.8 last, hitting fresh fourteen-month lows.
New Zealand’s Treasury: Global growth remains solid but rising trade tensions are a threat
New Zealand’s Treasury is out with its monthly economic indicators report for August, with the key highlights found below.
USD/CNY: Escalating US-China trade tension has likely revived interest in CNY put options
The USD/CNY risk reversals turned positive today, signalling the implied volatility premium for the CNY puts (bearish bets) is higher than that of CNY calls (bullish bets).
BOJ’s Kuroda: BOJ is unlikely to raise rates for “quite some time”
The policy normalization remains a distant dream for the Bank of Japan (BOJ).
Indonesia’s central bank intervenes after hit USD/IDR hits 20-year highs
The falling rupiah has forced Indonesia’s central bank to make its presence felt in the FX markets.
Key Focus ahead
Heading into Europe, the economic calendar remains a busy one, with a slew of final manufacturing PMI reports due on the cards from the Euro area economies. However, the main event risk remains the UK manufacturing PMI release that will drop in at 0830 GMT. The UK manufacturing PMI is seen accelerating to 55.0 in August versus last.
The NA session is expected to offer no macro news and light trading will persist, as the US and Canadian markets are closed in observance of Labour Day.
EUR/USD: Widening Italy-DE yield differential is EUR-negative
The EUR/USD is flat-lined around 1.16 but could feel the pull of gravity in Europe if the spread between the Italian and German bond yield spread continues to widen.
GBP/USD on the chopping block as Brexit gap widens
Monday’s economic calendar also sees a moderate showing for the Sterling, with the Markit Manufacturing PMI due at 08:30 GMT and forecast to come in at 55 (previous 54), while the BRC Like-For-Like Retail Sales for the year into August, due later on at 23:01 GMT.
The week ahead: US payrolls and looming tariffs – Nomura
Analysts at Nomura offered their outlook for the week ahead, noting the US payrolls and looming tariffs as a likely solid NFP report could be overshadowed by the US imposing more tariffs on China.
RBA: Expect no change in policy on Tuesday – ANZ
In the view of analysts Australia and New Zealand Banking Group (ANZ), the Reserve Bank of Australia (RBA) is expected to announce no changes to its monetary policy at its September policy meeting due tomorrow at 0430 GMT.
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