European Open /Asia Wrap: Bitcoin rips higher and its round and round we go for BREXIT and the pound

European Open 

Given that the picture around BREXIT is a bit muddier now, and with a massive macro calendar this week, I suspect trade and risk sentiment consolidates here until the market sees if data is bottoming, which is what equities appear to be pricing in. ISM data, US payrolls, and the Fed's rate decision are all due this week, so now is not really the time to be a hero.

 

Risk sentiment 

Traders will always try to anticipate future events rather than react to current ones. PMIs have been plunging for months, igniting fixed income and safe-haven rallies even although economic indicators look bad and continue to weaken but not as quickly as they used to, which for many speculators will be a signal to buy.

 

Bitcoin 

In one of the most significant Blockchain technology endorsements to date, Bitcoin ripped higher after Xi Jinping has underscored the vital role of blockchain technology in a group study session of a politburo meeting, urging more efforts to quicken development in the sector.

 

BREXIT and the Pound it's Round and Round we go

The pound remains mired in Brexit political limbo but there some light at the end of the divorce process. Media reports suggest  France will agree to a withdrawal extension to Jan.31 which intentionally scuttles plans for the Liberal Democrats and Scottish Nationalist election call for Dec 9 which would then allow Parliament longer to debate the withdrawal agreement.

Later today UK MPs are due to vote on UK PM Johnson's call for a general election. Tonight's UK parliamentary vote on an early ballot will almost certainly fail. 

 

Gold

Gold remains supported by an expected Fed rate cut, but gains could be limited by ongoing US-China trade talks and a probable EU 27 extension which quashes the no-deal Brexit risk 

 

Oil 

Oil markets have been offered most of the ASEAN session, but activity has been light. With no significant selling catalyst, it suggests a mild case of profit-taking setting in after the weak China data. 

 

G-10 currency markets

Public holidays in Asia today put a dampener on G-10 currency markets, and vols continue drifting lower. There hasn't been much in the way of client flow at all today.

 

Japan 

JGBs yields rose today, led by the front end. Reports that the BoJ is unlikely to ease policy at its meeting this week resulted in 2y and 5y trading weak. There wasn't a discernable currency impact as for the most part with risk trading better traders had, for the most part, ruled out a rate cut intervention by the BoJ. Overall USDJPY hasn't moved much from Friday's "risk-on" traders are targeting a test of the offers above 109.

 

Asia Market 

Asia market coattails US risk sentiment

Headlines on Friday from Peter Navarro, an adviser to US President Trump, saying that a Phase One US-China deal may be signed in November may have goosed the stock market, but this begs the question: is this really cause sound the rallying cry? Volumes are good on equity markets as risk on continues to reverberate across ASEAN bourses.

Yuan 

If you are short at proper levels above 7.10, you can be patient as eyes are now on the Asia-Pacific Economic Cooperation meetings taking place mid-November in Chile, as President Trump recently said he thinks a trade deal between US and China could be signed by then. Breaching 7.05 was the easy call but cracking the 7.0 USDCNH nut will need some help from a December tariff detente.