Forex today was mainly driven by the risk trends, with a major turnaround in the risk sentiment witnessed following China’s announcement of measures to lift the local stock markets, which in turn, helped the risk-recovery.
The rebound in the Asian stocks, led by China, offered a fresh boost to the Antipodeans, driving the Aussie back above the 0.71 barrier while the Kiwi also moved higher towards the 0.66 handle. The Yen lost ground on better risk appetite that pushed the USD/JPY pair to near 112.60 levels. Meanwhile, both the EUR and GBP traded modestly flat, awaiting fresh political headlines and macro news.
Amongst the commodities, gold prices on Comex retreated slightly to 1235 levels while oil prices extend recovery, with WTI back above the 66.50 barrier.
Main topics in Asia
EU rejects Italian deficit budget, gears up for a showdown – Reuters
UK Cabinet warned: Brexit transition period could last for years – The Times
Australia: Sentiment softens by housing spill-overs – Westpac
Trump slams his own pick for Fed chair in WSJ – Bloomberg
UK NAO: ‘No deal’ Brexit would mean costly border disruption – Reuters
China NDRC approves $100.6 billion in fixed asset investment projects in Jan-Sept
China NDRC: Will step up support to stabilize jobs in regions affected by US-China trade spat
EU’s Moscovici: Italy public debt may not go down in next 2 years – Le Repubblica
Key Focus ahead
Markets eagerly await some action in Wednesday’s European session, as a raft of Euro area flash manufacturing and services PMI reports will start dropping in from 0715 GMT. Also, the UK second-tier BBA mortgage approval data is due at 0830 GMT. However, the key focus will be on the UK PM Theresa Mays address to the British parliament on the Brexit deal, as concerns over the Irish backstop deadlock linger.
The NA session also remains quite eventful, with the US Markit manufacturing and services PMIs, followed by the key Bank of Canada (BOC) rate decision and press conference to be held by the Governor Poloz. Markets have already priced-in a 25bps rate hike by the BOC.
Besides, Fedspeaks, US EIA fuel stocks report and New Zealand’s trade data will also remain in focus later on Wednesday. Meanwhile, the Italian political and Saudi-related headlines will continue to drive the risk sentiment.
EUR/USD: Risk-on & upbeat PMIs may not translate into major gains as Italy concerns linger
The EUR/USD defended the key support zone yesterday, but a strong bounce may not materialize, courtesy of lingering Italy concerns. As of now, it appears that Italy is in no mood to negotiate with the commission.
GBP/USD chained to 1.3000 as Brexit continues to hang above, US PMIs in the barrel
Wednesday sees the Pound teetering on the edge of further losses if bidders can’t keep the wheels on amidst Brexit headlines that point south.
New home sales: preview: recent bounce seems transitory – Nomura
“We expect a 0.6% m-o-m decline in new home sales to 625k saar in September following a rebound in August which appears transitory (Consensus: -0.6% to 625k).”
Will the ECB Send Euro to New Lows?
This is an important week for the euro. Not only will the latest PMI and German IFO reports be released but the European Central Bank also has a monetary policy announcement. EURUSD is trading below 1.15 ahead of the rate decision…
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