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  • Brexit headlines fail to supersede trade optimism.
  • PBOC’s inaction, comments from Chinese State Planner propel commodity-linked currencies.
  • German PPI, Canadian election, speech from BOE’s Halande and trade/Brexit headlines will be the key.

Except for the initial downbeat reaction to the weekend Brexit headlines, Forex today seems to have largely ignored the uncertainty surrounding the United Kingdom’s (UK) exit from the European Union (EU). The reason becomes upbeat trade headlines as conveyed by the South China Morning Post (SCMP). In addition to this, a lack of major rate change by the People’s Bank of China (PBOC) and positive comments from China’s State Planner also favors the risk tone. However, incoming European Central Bank (ECB) President Christine Lagarde seems too worried about the global trade and so do the global Financial Chiefs gathered at the joint International Monetary Fund (IMF)-World Bank meetings over the weekend.

With this, the US Dollar (USD) stays an inch stronger against the Euro (EUR) and the British Pound (GBP) while the Dollars of Australia, New Zealand and Canada seem to have gained against the greenback. Further, risk-tone recovers and weakens the Japanese Yen, Gold and the Swiss Franc (CHF) while Oil stays mostly unchanged amid mixed messages.

Main Topics in Asia

China’s State Planner: Claims of sharp economic slowdown are baseless

China sets one-year loan prime rate at 4.20%

Incoming ECB Chief Lagarde: President Trump can unlock uncertainty – Bloomberg

Goldman Sachs: Fed easing has offset the effects of the trade war

Key Focus Ahead

With the EU still to approve the UK’s Brexit extension request and the British Parliament left to debate/vote Prime Minister (PM) Boris Johnson’s plan, headlines concerning the UK’s departure will be the key to watch. Also spicing the issue is the opposition Labour party’s readiness to put forward another referendum. Canada is up for Federal Election with no majority expected to roll out. Moving on, the economic calendar is mostly silent as the US Federal reserve officials enter the blackout period. However, comments from the Bank of England (BOE) policymaker and German Producer Price Index (PPI) data will also be observed for intermediate action.

EUR/USD registers longest weekly winning streak since July 2018

EUR/USD jumped 1.22% last week, confirming the longest weekly winning run in over a year.  Waning Brexit optimism is weighing over Pound and may cap upside in the common currency.  

GBP/USD: Options market turns bearish on Pound, indicates waning Brexit optimism

GBP/USD’s options market is currently reporting the strongest bearish bias since April. UK’s parliament on Saturday rejected Prime Minister Johnson’s Brexit deal.

USD/JPY looks to Brexit uncertainty to open-up the downside

Financial markets were focused on Brexit in the final days of the week, albeit the  Chinese Gross Domestic Produce disappointment  was also a weight on  risk appetite. All in all, stocks were underperforming into the close with the S&P 500 off by 0.4%, while the DAX was down 0.2% and the FTSE 100 was off 0.4%.