U.S. dollar highlights:
USD firm as markets are cautious about trade negotiation progress with China. Sentiment is currently risk-off after a Chinese agriculture delegation cancelled a visit to Montana last week Friday. In addition, deputy level trade talks last week were “constructive” and “productive”. This will set precedence for high-level negotiations next month. Meanwhile, the Manufacturing Index increased to 51.0 reading (from a ten-year low of 50.3 in August). However, the Services Index reading was the lowest in 3.5 years at 50.9 in September (from 50.7 in August and lower than expected 51.3). New Home Sales for August expecting 0.667 million/5.1% increase in August (available tomorrow).
Canadian dollar highlights:
CAD stable after Wholesale Trade sales in July increased 1.7% (versus 0.4% forecast). CAD continues to be supported by crude oil prices. Saudi Arabia said it will recover all lost output by the end of September after the drone attacks on its facilities. Markets are still concerned over demand after Eurozone Manufacturing was weak. Geopolitical tensions are increasing in the Middle East as Iran’s Foreign Minister Mohammad Zarif is prepared for war after increased U.S. troops and weapons in Saudi Arabia. CAD direction this week will be based on general risk sentiment and any new trade developments.
EUR continues to weaken after Manufacturing sentiment in the Eurozone dropped to the worst level in seven years. The Manufacturing Purchase Managers Index contracted to 45.6 in September (from 47.0 in August and lower than expected 47.3). German Manufacturing dropped to the worst reading in more than 10 years at 41.4 (from 43.5) overall. Weak global growth and the ongoing trade war between U.S. and China is affecting the Eurozone economy and is close to stalling. Meanwhile, the European Central Bank asked Eurozone countries to use fiscal measures to alleviate the slowdown (after already lowering interest rates).
British pound highlights:
GBP defensive as markets wait for the Supreme Court’s ruling today on whether Prime Minister Boris Johnson’s suspension of parliament (until October 14) was legal. Johnson could be forced to recall the legislature, and this would affect his no-deal Brexit plans. GBP has been stronger the past two weeks; however, the focus will be on political headlines this week.