Market calm appears to be returning with comments of fresh stimulus measures, offsetting global recession fears. US$ index remains firm, Eur and C$ both rebounding from recent lows and safe-haven currencies selling off. Mixed signals from US as economic advisor highlighting China/US in 10 days and the possibility of a 2nd round of talks in the US. The positive comments where offset when the president commented that “he was not ready yet to make a trade with China”. Trade comments will continue to dominate market direction, as well this week fed chief Powell will make a speech at the Jackson Hole central bank conference.
C$ continued to rebound from its lows as market confidence returns and commodity prices strengthen. Oil rallied further on the news of a drone attack on a Saudi oilfield creating supply concerns. In the bigger picture, an OPEC report sees bearish oil markets for the rest of 2019. C$ may continue to rally in the short term, but the ongoing trade concerns and the prospect of weaker oil will have an impact. Bias remains to stage into buying dips at key support levels.
Euro retraced from a six-week low vs US$ on the prospect of Germany ditching its balanced budget rule to take on new debt and launch new stimulus steps. German Finance Minister that Germany has the fiscal strength to counter any future economic crisis “with full force”. 1.1250 level is a short term pivot point for the currency.
GBP rally has stalled, but UK PM is set to meet his counterparts in France and Germany this week to discuss Brexit ahead of the G7 summit on the weekend. GBP remains volatile and vulnerable to swings on Brexit comments ahead of the 31st Oct deadline.