SNB kept the target rate unchanged but adjusted its exemption threshold. It doesn't say how much, but that it is raising the threshold and that hence this will reduce negative interest income for the central bank. I think this effectively means that the average rate charged on excess liquidity will now be less negative than before and mirroring the ECB to help domestic banks.


Last word on the FOMC

Between the FOMC and ECB, Central Banks are hitting open markets market expectations and that its. The lack of central bank action could manifest into a much more massive disappointment over time, especially if the US data turns south, but currently, the markets are only expressing a sense on minor disappointment.

However, in the meantime, the markets could pivot the trade war calm, which could ultimately be supportive of risk assets and negative for defensive plays.


Last word on the BoJ

As for the final word on the BoJ, the market is reading the 're-examination' referred to at Thursday's meeting as an indication of BoJ action next month.



I think Gold is exceptionally vulnerable to the combination of very long positioning, a less dovish central bank narrative and more trade calming news flows. The fact that Gold is not trading lower after a less dovish Fed is a testament to Gold resilient demand as an alternative asset. However, after traders have had time to digest the full extent of the Fed messaging, it could trigger more profit-taking in the days ahead. While the Fed is likely to cut again this year the outlook for yield differential will remain positive for the USD which could maintain its robust status as a high yielding currency amidst a gradual fall in “risk-off” momentum



A tranquil day in the oil markets as the market appears to be going through a period of shocker recovery. However, with the weekend quickly approaching, in the absence of a more measured response from the U.S. or Saudi Arabia. Traders will be more apt to maintain hedges against possible weekend headline risk. Suggesting that unless more friendly news flows convince trader to unwind risk premiums to a more significant degree, it could keep a bid under oil markets for the rest of the week. However, the tide is gradually shifting lower and with sanction the likely form of retaliation it could press both oil prices and risk premiums lower.



USDCNH is trading at 7.0860-1066. It traded higher after onshore spot broke above 7.10 on reported corporate demand. The USDCNY fix was towards the low end of expectations. I could see a bit more of a squeeze, but given the trade war calm and expected positive news flows leading up the US-China trade meeting, spot could have limited upside. The renminbi has been a big casualty of the trade war; so, a continued thaw in US-China relations should ultimately be positive for the Yuan.



The Fed disappointed the uber-doves on Wednesday to no end. The USD should gain the upper hand as carry and funding remain in focus going into Q4, which should weigh heavy on the recent gains in AUD and NZD.

The recent rally in Australia fixed income continues as August unemployment rate rose, which has triggered several institutions to bring forward expectations for the next RBA cut in October. Which could also sour Aussie dollar sentiment?



With the big central bank, out of the way the greenback should find support as traders will start to focus on the data European data has been improving somewhat, but with Germany still struggling the single currencies gains might be limited until that changes.

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