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  • The market remains risk-averse amid gloomy outlook for Brexit, US-China trade deal.
  • Oil prices stay on the back foot amid rising doubts on global economic growth.
  • China says the US playing “good cop-bad cop” ahead of November talks.

While a lack of major data/events keep markets focused on the trade/Brexit headlines, doubts over global economic strength extend the US Dollar’s (USD) positive momentum on early Friday. China termed the US Vice President Mike Pence’s criticism of Chinese human rights records and support for Hong Kong as playing “good cop-bad cop” ahead of the key trade summit in Chile, up for early November.

Further, Reuters’ poll of economists suggests global economic growth in 2020 to decline below the International Monetary Fund’s (IMF) latest downgraded forecast of 3.4% to 3.1%. Also spreading pessimism during the Asian session was the news that global rating agency Fitch slashed India’s 2019/20 growth to be at the six-year low of 5.5%.

With this, Oil prices have an additional reason, other than receding geopolitical tension and likely increase in the global supply, mainly supported by the United States (US) and Saudi Arabia, to extend the latest declines.

On the currency front, the Euro (EUR) keep the losses backed by the European Central Bank’s (ECB) downbeat assessment while the British Pound (GBP) hold onto declines as traders doubt British Prime Minister’s (PM) ability to break more than three-year-old Brexit deadlock. Moving on, Antipodeans have fewer catalysts to question the recent weakness while the Japanese Yen (JPY) and Gold have to bear the burden of the USD strength.

Main Topics in Asia

Analysts: Pence and Trump play ‘bad cop/good cop’ ahead of anticipated China-US summit – Global Times

Fitch slashes India’s growth outlook to 6-year low – Indian Express

Deeper global slowdown likely despite a round of rate cuts – Reuters Poll

USD/JPY risk reversals hit three-month highs on call demand

Key Focus Ahead

Except for the German Consumer Confidence and IFO numbers, the European and the UK session are likely to keep the market focus on the trade/Brexit headlines. During the United States’ (US) session, Michigan Consumer Sentiment Index may entertain investors.

While no major data/event is up for publishing, speculations surrounding the European Union’s (EU) response to the Brexit extension and the UK Parliamentary process on the PM’s snap election motion will entertain markets ahead of the key week. It should also be noted that the US Defence Secretary recently criticized Turkey’s Syrian invasion and might trigger the pullback in oil prices during the later part of the day.

EUR/USD: On the defensive, eyes German IFO

EUR/USD created a bearish candlestick pattern on Thursday.  A drop to key support at 1.1170 could be in the offing.  The bulls need the forward-looking German IFO  Expectations Index to beat estimates.  

GBP/USD: Sterling may remain depressed due to UK political uncertainty

Doubts over Brexit likely to keep GBP/USD under pressure.  EU is likely to grant a three-month extension, but the decision may not come on Friday.  UK PM calls for a snap election, opposition rejects the election offer.  

USD/JPY: Brexit fray and Chinese risk on the cards, Yen supportive

200-DMA caps bullish progress as geopolitics remain in the driving seat – (Yen bullish). Brexit is up in the air and China may well respond in kind to US VP Pence’s antagonistic comments – (Yen bullish)