Thursday September 5th, 2019

Trade talks were front and centre today. “Lead negotiators from both sides had a really good phone call this morning,” ministry spokesman Gao Feng said in a weekly briefing. “We’ll strive to achieve substantial progress during the 13th Sino-U.S. high-level negotiations in early October.” Investor response was positive adopting a “Risk-On” approach with Yen & US$ both weaker, commodity currencies stronger and equities/Oil rallied. Watch for today’s US PMI data for intraday direction. Investor focus will switch to tomorrows US unemployment data and Fed Chairs Powell speech in the afternoon.

C$ rallied on a combination of BOC keeping rates unchanged, a 4% rally in oil prices and expectations of trade talks resuming in October. C$ is opening at the lower end of its two-month trading range. Investors will focus on Friday’s Canadian unemployment data for short term direction. Bias remains to take opportunity to buy US$ on dips.

Despite the positive tone from Sino/US trade talk resuming and diminishing possibility of a no-deal Brexit, Eur could only muster modest gains vs US$. Falling demand from overseas saw a bigger-than-expected drop in German industrial orders in July.  Fears are rising that Europe’s biggest economy could enter into recession by 3Q. Bias remains for weaker Eur.

UK PM’s push for a no-deal Brexit may have backfired after losing his small majority and being blocked in his attempt to call a snap election. Expect legislation to be passed to protect against a no-deal Brexit, before any election is likely to take place. GBP rallied almost 1 ½ % on the prospect of blocking the no-deal Brexit. Expect more GBP volatility – 56 days until Oct31st deadline.