Amid improved risk tones on no-deal Brexit defeat in the UK Parliament, and as indicated by mostly higher Asian equities, bounce in the Wall Street futures and Treasury yields, the Australian dollar emerged the strongest across the fx board in Wednesday’s Asian trading.
AUD/USD extended Tuesday’s recovery and reached weekly tops of 0.6785 even though the Australian economy expanded at its slowest pace in a decade last quarter. The Kiwi also tracked the Aussie higher and tested the 0.6350 level amid firmer commodities’ prices. The resource-linked Loonie held onto the previous gains amid higher oil prices and ahead of the Bank of Canada’s (BOC) interest rate decision. Meanwhile, the Yen traded on the back foot, despite upbeat Japanese Services PMI data, as Bank of Japan (BOJ) board member Kataoka’s comments weighed alongside better risk appetite. Therefore, the USD/JPY pair regained the 106 handle, up +0.15% so far.
Heading into Europe, the EUR/USD pair keeps the recovery mode intact below the 1.10 handle amid disappointing US ISM PMI-led broad USD weakness. The Cable holds mild gains near 1.2100 on PM Johnson’s government defeat, awaiting the UK Services PMI release.
Main Topics in Asia
Breaking: Brexit vote Yes 328 to block 301 no to block, UK gov loses vote
UK PM Johnson: If MPs vote tomorrow to stop negotiations then that (election) would be the only way…
Ireland’s Donohoe: EU still needs significant reason for Brexit extension
ECB’s Villeroy signals skepticism over fresh bond buying – Bloomberg
Australian GDP falls in line with expectations
BOJ’s Kataoka: Important for BOJ to act pre-emptively when economic, price risks heightening
China’s Caixin services PMI rises to 52.1 in August, Aussie keeps weekly tops
China asserts power to declare emergency to quell Hong Kong unrest – WSJ
Russia’s Novak: Russia will continue coordination with the OPEC
Key Focus Ahead
Wednesday’ EUR macro calendar remains a busy one, as a raft from Services PMI reports will be published from across the Euro area economies and the UK. The PMI numbers will start tricking in from 0715 GMT. The main focus will be on the nominated ECB President Lagarde’s speech. Lagarde is due to speak in front of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament. Also, the UK Services PMI, due at 0830 GMT, will be closely eyed for fresh GBP moves, as another vote to stop the Brexit negotiations with the EU looms.
The NA session sees the US and Canadian trade reports at 1230 GMT, following by the all-important BOC rate decision and press conference at 1400 GMT and 1515 GMT respectively. A slew of speeches from the Federal Reserve (Fed) officials will also highlight the American session ahead of the American Petroleum Institute’s (API) weekly Crude Stock data due at 2030 GMT.
Despite a busy docket, any fresh US-China trade headlines and US President Trump’s comments will keep the markets on the edge.
EUR/USD snaps longest losing streak since five months, focus on Lagarde’s speech
EUR/USD on Tuesday snapped the six-day losing streak with a Dragonfly Doji. A break above 1.10 may remain elusive if the incoming ECB President Lagarde sounds dovish during her speech at 07:00 GMT.
GBP/USD holds on to recovery gains ahead of UK services PMI, Brexit votes at the parliament
Receding odds of no-deal Brexit help GBP/USD to carry its overnight recovery forward. UK MPs will vote to stop Brexit negotiations with the EU, as election looms. Focus on UK Services PMI and Fed speak.
Boris Johnson Loses Brexit Delay Vote 328 to 301, 21 Tories Rebel: What’s Next?
If the bill passes tomorrow, it goes to the House of Lords where it will be debated. First, Johnson will attempt a filibuster.
Bank of Canada Rate Decision – Will They Cut?
If the BOC is more hawkish, watch for USD/CAD to remain under the 1.3345/1.3357 resistance zone, and trade back into the range. If they are more dovish, there is room for the pair to trade up towards 1.3500.
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