Lingering trade war and recession fears kept the Asian trades in a limbo, as the ongoing Yuan weakness combined with higher Wall Street futures and the recovery in the US Treasury yields sent mixed signals. Safe-havens such as the Yen and Gold lost ground amid increased demand for the risk assets such as oil, equities and Treasury yields.
However, the higher-yielding currencies, the Antipodeans, failed to benefit from improved risk tones and suffered moderate losses on weak fundamentals and persistent weakness in the onshore Chinese Yuan. Meanwhile, the USD/JPY pair held onto gains, but remained below the 106 handle.
Heading into Europe, the EUR/USD pair is seen trapped within the familiar range below the 1.11 handle while the Cable consolidates Tuesday’s rally below 1.23 handle, awaiting fresh political cues.
Main Topics in Asia
Italy’s Di Maio: The new government proposal will be voted online by next week
UK FinMin Javid: Will announce increase in public spending on schools, police and health on September 04
RBNZ Governor Orr: monetary policy remains as effective as ever – Full speech
UK shop prices registered sharpest decline in over a year in August
PBOC sets Yuan reference rate at 7.0835
US moves swiftly to implement Trump’s trade war tariff increase on Chinese goods – SCMP
Asian stocks ex-Shanghai Composite track S&P 500 futures higher
US yield curve inverts to levels last seen in 2007
Japan’s move to lower S. Korea trade status takes effect – Associated Press
China-US 10-yr yield spread hits highest since December 2017
Key Focus Ahead
The dry spell continues in the European calendar this Wednesday, as Germany’s Import Price Index and Gfk Consumer Confidence Survey fill in for a sparse data. Later in the European mid-morning, the Eurozone credit growth data will be reported at 0800 GMT. The UK docket has nothing to offer, but the pound could continue to draw support from positive Brexit news.
The NA session also remains a thin-showing, with no relevant first-tier macro data due on the cards. Therefore, the speeches by the FOMC members Barkin and Daly will be closely eyed for fresh dollar trades.
Markets will continue to watch out for fresh US-China trade headlines and the US President Trump’s comments among Brexit and Italian political developments for near-term trading directives.
EUR/USD remains below 1.11 despite US curve inversion, slide in US-German yield spread
EUR/USD remains on the defensive below 1.11 ahead of the London open despite the US yield curve inversion and the slide in the US-German yield spread to the lowest level since the first quarter of 2018.
GBP/USD remains subdued ahead of Brexit talks at Brussels
UK’s political uncertainty drags the GBP/USD from the monthly top. British politicians are active to defy no-deal Brexit, expected proroguing of the Parliaments. All eyes on David Frost’s visit to Brussels.
WTI: Looks north with falling channel breakout on the daily chart
WTI oil is looking north with falling channel breakout on the daily chart. A break above $56 could be seen during the day ahead.
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