Forex today experienced cautious optimism in Asia this Wednesday, as the Asian equities tracked the Wall Street risk-off slide triggered by growing US recession fears while the US dollar remained broadly weaker despite a bounce in the Treasury yields and US equity futures. Meanwhile, gold prices stalled its recent upside from $ 1455 levels.
Amongst the G10 currencies, the Aussie was the top performer, having extended the bounce from near-decade lows above the 0.67 handle. The Kiwi also followed suit and briefly recovered above the 0.6250 level. The Yen stalled its recovery near 107.65 vs. the greenback, as USD/JPY returned to the green zone in a bid to regain the 108 handle.
Meanwhile, the pound was the weakest, as the Cable slipped back below 1.2300 amid Brexit chaos and ahead of the key Brexit-related announcements. EUR/USD remained in a tight range below 1.0950 while USD/CAD tested the 1.32 handle amid a recovery in oil prices and softer US dollar.
Main Topics in Asia
Brexit: Extracts of UK PM Johnson’s speech, hints of the proposal to EU
Irish Foreign Minister: If there is a proposal that involves customs checks on island of Ireland, ‘that in itself is bad faith’
UK PM strikes secret deal with DUP in ‘Final Brexit Offer’ – Guardian
Jacob Rees-Mogg set to ask Queen for suspension of Parliament this Weekend – Times
Chances of an October Fed rate cut rise on US recession fears
Japan LDP Tax Chief Amari: Japan to act quickly to address any tax hike fallout
Asian stocks drop on disappointing US data
EU Diplomat: UK PM Johnson’s plan for Irish border is a kamikaze move – The Times
UK budget is expected to be delayed until after October 31- FT
Key Focus Ahead
Following a busy start to the week, Wednesday’s EUR data docket remains a thin showing, with the only UK Markit Construction PMI, due at 0830 GMT, of note. The Swiss Consumer Price Index (CPI) will be reported at 0630 GMT. The key focus will be on the UK PM Johnson’s announcement of his final Brexit proposal that will be submitted to the EU after his closing speech at the Annual Conservatives’ Conference.
Across the Atlantic, the US ADP Employment Change report (due at 1230 GMT) and speech from the Fed official Williams would be eagerly awaited for fresh signs on the US economic situation and Fed’s rate cut outlook. Also, the US political and trade developments remain in the spotlight and could have a significant impact on the market sentiment.
EUR/USD may draw bids on rising Fed rate cut odds
EUR/USD on Tuesday eked out a 0.32% gain and could remain better bid Wednesday, courtesy of the heightened US recession fears and the resulting rise in the odds of an October Federal Reserve (Fed) rate cut.
GBP/USD: Sellers return ahead of key Brexit announcements
GBP/USD reacts negatively to early-day headlines increasing the odds of a no-deal Brexit. Media leaks suggest the UK PM Johnson’s final Brexit proposal to the EU seems to have a little acceptance. UK Construction PMI, US ADP jobs and Fedspeak to decorate the macro calendar.
US ADP Employment Preview: Beware negative trends
Private payrolls to drop to below trend. ADP figures have been volatile this year. NFP and ADP averages have declined this year.
Non-Farm Payrolls: EUR/USD volatility set to rise – fasten your seat belts
The worst manufacturing PMI in 10 years raises concerns about the US economy. Two disappointing Non-Farm Payrolls reports also push tensions higher. EUR/USD volatility may rise after several years of relatively muted responses.
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