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Forex today witnessed a quiet affair, as risk-off sentiment seeped back in Asia amid renewed Australian political tensions and Brexit uncertainty. Meanwhile, the latest gunshots fired at the US embassy in Ankara also fuelled risk-aversion further. As a result, the US dollar extended its gradual recovery across its main competitors, with the Antipodeans losing the most.  The Euro and pound followed suit and remained exposed to further downside bias amid looming political tensions. Meanwhile, the USD/JPY pair extended its advance above the 110.50 levels, despite mixed tone on the Asian equities and weaker Treasury yields.

Amongst the commodities, both crude benchmarks traded on the back foot, with WTI back below the $ 65 mark. Gold futures on Comex extended its bounce above $ 1190 level while Comex copper prices weakened 0.60% to $ 2.645.

Main topics in Asia

Weekend highlights: Italy, Turkey, ECB, China, Brexit, North Korea – its all here

The open this week is subdued, ranges 12 pips at the most in the case of cable.  We are lacking price action catalysts on the calendar, leaving us to look at what has occurred from Friday’s close and a browse over the weekend.  

Italy’s Cabinet Undersecretary wants the ECB to extend QE program

Italian Cabinet Undersecretary Giancarlo Giorgetti, while speaking to newspaper II Messaggero over the weekend, said the European Central Bank (ECB) should extend the quantitative easing (QE) program to help protect Italy from financial speculators.

Australian PM Turnbull plays down risk of leadership challenge – Reuters

Australia’s Prime Minister (PM) Malcolm Turnbull played down speculations of an early election on Monday, as he faces a leadership challenge within his own party, Reuters reports.

USD/TRY Technical Analysis: Odds stacked in favor of bulls

The USD/TRY hourly chart shows a falling wedge breakout – a bullish pattern – which indicates the pullback from the recent high of 7.08 has ended and the bulls are back in a commanding position.  

China’s Li: No winners in trade war

Comments from China’s Premier are crossing the wires via Reuters:  

Gold speculators go bearish for the first time since 2002

The non-commercial futures contracts of  Gold  futures totaled a net position of -3,688 contracts in the week ended August 14th – down 16,376 contracts from the previous week’s total of 12,688 net contracts.

Key Focus ahead

We have a quiet start to a data-light week ahead, with the Eurozone producer’s price index, (PPI), construction output and German Bundesbank monthly economic report, the only key macro news due on the cards. The economic data are expected to have limited impact across the fx space, as the Italian budget concerns and Brexit uncertainty will continue to drive the sentiment in Europe.

In the NA session, in absence of economic data from the US and Canada, the FOMC member Bostic’s speech will hog the limelight ahead of the RBA Governor Lower speech scheduled in early Asia.

EUR/USD: Italian budget fears could cap gains

The common currency could take a hit if the 10-year Italy and German yield spread spikes. The  Eurozone  producer price index and Bundesbank’s monthly report, due today, are unlikely to have a significant impact on the EUR pairs.

GBP/USD: Bears continue to guard 1.2750/55 as UK readies for a no-Brexit deal

The  GBP/USD  pair set off the week on a weaker note, consolidating last week’s rebound near the midpoint of the 1.27 handle, as the markets remain cautious heading into the releases of the first of a series of notices on how to deal with a hard Brexit later this week.

Euro crosses and their outlooks – Nordea

Martin Enlund and Andreas Steno Larsen, analysts at Nordea offered some FX quickies for those of a tactical persuasion.

Economists expect the BOE to hike rates two times in 2019

A Bloomberg survey shows the economists are expecting the  Bank of England(BOE) to hike  rates  twice in 2019.

US: Focus on housing market and Jackson Hole this week – NBF

In the U.S,  the week will provide important information about the housing market in July with the release of sales data for new and existing homes, points out the research team at National Bank Financial.