The overnight Brexit deal rhetoric prompted a bullish opening gap in the Cable, as the pound bounced to 2-week highs to near 1.3050 level vs. the greenback. The opening jump was quickly reversed and the spot gave up the 1.30 handle on fresh conflicting Brexit headlines that cited a Brexit deal is far from certain, as the uncertainty around the Irish border issue still looms.
Amongst other majors, the Antipodeans slipped on disappointing Chinese services PMI release and risk-off trades on the Asian equities. Meanwhile, the USD/JPY traded modestly flat around the 113.25 level, as the Yen was undermined by the BoJ’s Governor Kuroda’s comments on the monetary policy and inflation outlook. The EUR/USD treaded cautiously below the 1.14 handle, as the focus now shifts towards the US mid-term elections due tomorrow.
On the commodities front, both crude benchmarks traded on the back foot, in spite of the US sanctions on Iran officially kicking-off today. Gold prices on Comex were little changed near USD 1235 while copper futures on Comex dropped -1.21% to 2.780 on China growth concerns amid a skepticism over the US-China trade deal.
Main Topics in Asia
BoJ Meeting Minutes see limited focus on September’s meeting
UK’s PM May odds of Irish border deal “50-50” – The Guardian
Brexit deal is far from certain – The Irish Times
New Zealand Treasury: Business confidence seems to have stabilized, trade tensions hurt global growth prospects
China’s Caixin services PMI drops sharply to 50.8 in October, 13-month lows
China’s Xi pledges to open market to the world
BoJ’s Kuroda: BoJ will seek to exit accommodative policy if inflation reaches 2%
Asian stocks drop on concerns US and China may not reach a quick trade deal
BoJ’s Kuroda: No change in central bank’s stance to achieve the 2% price target
Key Focus Ahead
We are heading into a relatively light EUR macro calendar, with the UK services PMI dropping in at 0930 GMT and expected to arrive at 53.3 in October vs. 53.9 last. At the same time, the Eurozone Sentix investor confidence data is due, which is expected to show a dip in the investors’ morale for the month of November amid the European political woes and weaker fundamentals.
The NA session also appears quiet, as only the US ISM non-manufacturing PMI report will be closely eyed amid a lack of relevant news from Canada. Also, the Bank of Canada (BoC) Governor Poloz’s comments will remain in focus, as he is due to speak about the financial markets and implications for monetary policy at the Canada-UK Chamber of Commerce, in London.
However, the macro releases will play a second fiddle to the Brexit-related headlines and US mid-term elections anxiety, which will remain the main market drivers in the coming days.
EUR/USD: Trapped in a falling wedge ahead of the US midterm elections
A Republican victory in both houses, however, could mean more fiscal stimulus, in which case a falling wedge breakout may remain a distant dream. The caution ahead of the midterm elections will likely keep the EUR/USD flatlined today.
GBP/USD weakening from 1.3000 as Brexit headlines fail to keep bulls on track
Brexit headlines continue to drive false hope in the GBP/USD, sparking half-hearted bull runs. The UK services PMI Monday could showcase growing signs of an economic slowdown across both continents.
US Congressional election update – Uncertainty is the winner
The Congressional election has had a volatile trajectory this year. Six weeks ago the Democrats looked to ride the historical advantage for the party out of the White House in non-Presidential elections to a sweeping victory in the House with a takeover in the Senate a distinct possibility.
RBA to stick on rates, but maintain positive outlook – TD Securities
According to analysts at TD Securities, The Reserve Bank of Australia (RBA) is more than likely to remain unmoved on interest rates for the time being.
Will the US Mid-Term Elections Boost Gold?
“We invite you to read our today’s article about the upcoming US Mid-Term Elections and find out what are the likely consequences for the gold market.”
Fed to signal gradual rate hikes on Thursday, get long EURUSD
Rather than making any immediate policy changes, the Fed will likely use the meeting to discuss the size and composition its balance sheet should have after the normalization is completed.
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