Wednesday August 28th, 2019

Fading optimism for the Sino/US trade agreement and growing recession concerns as US yield curve inverts further.  Saw safe-haven currencies strengthened, Aud fell to decade-low levels and CNY remains near 11 year lows. A BBC comment that the British Queen could be asked to suspend parliament, saw sharp sell off of GBP.

Growing speculation that the BOC could announce a surprise rate cut on Sept 4th, saw C$ weaken despite stronger oil prices. Mixed signals for C$ continue as Goldman Sachs says “short the loonie before BOC policy shifts”, whilst other strategists suggesting the opposite buying C$. In our opinion recession concerns will be negative for C$ and our bias remains buying dips.

Eur remains under-pressure from the continuing Sino/US trade war as its negatively impacting European manufacturing, which is depressing growth prospects. On a positive note, it is anticipate the Italian government is on the verge of agreeing a new coalition. Our bias remains negative on Euro, a break of 1.1025 could see increased Eur selling.

GBP rallied yesterday on UK opposition leaders comments to do anything to prevent a no-deal Brexit. The positive sentiment quickly turned negative when a BBC journalist said the British Queen could be asked to agree to suspend parliament. Effectively the parliament could be shut down from Sept 11th to Oct 14th, which could hamper lawmakers blocking a no-deal Brexit. GBP immediately sold off over 0.5% on the news and remains vulnerable to further weakness.