U.S. Dollar Highlights:
USD firm as risk appetite returns ahead of the next round of trade negotiations with China starting today. Vice Premier Lui is in Washington and China said they are open to a partial trade deal; however, the U.S. prefers a more comprehensive agreement. Tensions have increased again after President Trump imposed visa bans on Chinese officials and blacklisted some technology companies. Trump also plans to ban U.S. pension funds investing in China. To avoid further tariffs, China is planning to increase buying agricultural products from the U.S. by $10 Billion annually. Federal Reserve Chairman Jerome Powell said the Fed will resume growing its balance sheet and this increased risk appetite. Meanwhile the latest FOMC meeting minutes reiterated that risks come from abroad (Brexit), the chances of a recession are limited, and the overall economy is healthy. Most Fed policymakers felt a 25bps rate cut was warranted and expressed concerns about risks associated with trade tensions, geopolitics and the global economy. Markets have already priced in an 80% chance of another interest rate cut before the end of 2019. Inflation Rate for September expecting 0.1% monthly and 1.7% year over year today.
Canadian Dollar Highlights:
CAD weaker as trade talks resume and oil prices rally. Markets are hopeful for a deal between U.S. and China to give CAD support. China is willing to confirm an agreement if President Trump does not impose any more tariffs (including this month and December). All eyes on tomorrow’s Jobless rate for September (previously 5.7%) and the average hourly wages (previously 3.8%).
EUR defensive after the European Union stated they could extend Britain’s membership until next summer to allow for a second Brexit referendum. EUR has been suffering due to Brexit uncertainty and increased political tensions. Monetary policy meeting minutes from the central bank will be available today and markets have already priced in a 50% chance of another rate cut in January 2020. However, the central bank’s Vice-President Luis de Guindos said interest rates are at a “correct level at present” and parameters for the new Quantitative Easing program must remain stable and predictable.
British Pound Highlights:
GBP continues weaker after Brexit talks stalled as the U.K. and European Union could not resolve the Northern Ireland customs issue (again). The Northern Irish Democratic Unionist Party stated they would not support the compromise from the European Union on the backstop issue. Prime Minister Boris Johnson is obligated by law to request an extension to Article 50 if no Brexit deal is finalized by October 31. Meanwhile, GBP continues to suffer and the Bank of England is also considering cutting interest rates to boost the economy. GDP for August expecting 05 monthly and 0.9% year over year today.