The risk-on market profile was witnessed across the financial markets in Asian trading, mainly induced by the ongoing US-China trade optimism. However, the sentiment got a further boost on the Financial Times (FT) report that cited the US is considering dropping the existing tariffs on Chinese goods. As a result, the US dollar stalled its profit-taking rally across the board, with the anti-risk Yen emerging the main laggard while the Aussie topped the G10 currencies.
USD/JPY jumped to multi-day tops near 108.80 as the risk-on rally in the US Treasury yields and Asian stocks underpinned. Meanwhile, the AUD/USD pair enjoyed good two-way businesses, finally capitalizing on upbeat trade sentiment and no-rate change decision announced by the Reserve Bank of Australia (RBA) earlier today. The Aussie regained the 0.69 handle while the Kiwi traded with moderate gains above the 0.6400 level. The safe-haven Swiss franc slipped against the US dollar and tested the 0.99 handle while gold prices fell back below the 1510 level. Meanwhile, both crude benchmarks traded modestly flat, having reversed an early dip amid stronger US dollar and rising US-Iran geopolitical tensions. The resource-linked Loonie also trades neutral around 1.3150, awaiting fresh catalysts.
Ahead of the European, both the European currencies, the EUR/USD and Cable are trading flat, with the Fiber probing highs near 1.1130 while the latter remains depressed below the 1.29 handle.
Main Topics in Asia
Iran’s ForeignMin Spokesman Mousavi: New American sanctions a sign of US bullying
China pressing US Pres. Trump to remove more tariffs ahead of trade deal signing – Politico
Fed’s Daly: Last three rate cuts were made to be supportive so we don’t find ourselves in a slowdown
Fed’s Daly: A slightly accommodative stance is required to continue to sustain the US expansion
Australian Treasurer Frydenberg: Govt maintains RBA's 2-3% inflation target
US considers dropping some tariffs on China - FT
President Trump: We are so close, China wants to make a deal badly
BOJ trims long-term JGB purchases for first since Sept. 20
China's Caixin services PMI unexpectedly drops to 51.1 in October
RBA leaves rate unchanged at 0.75%
RBA: Will ease policy if needed to support sustainable growth
Indonesia GDP grows 5.02% YoY in Q3, USD/IDR stays on the backfoot
BOJ’s Kuroda: Need to continue with large-scale easing
Key Focus Ahead
The immediate focus shifts towards the UK Markit Services PMI for October, due at 0930 GMT and is likely to arrive at 49.7 vs. 49.5 last. Should the data surprise negatively, it's only likely to add to the negative tone around the Cable seen so far this week. Next of relevance remains the Eurozone September Producer Price Index (PPI) data release at 1000 GMT, which is likely to have a negligible impact on the EUR markets. Meanwhile, the UK political developments will keep the EUR, GBP traders entertained until the US docket sees a fresh batch of macro releases later in the day.
The US and Canadian Trade Balance data will drop in at 1330 GMT, followed by New Zealand’s (NZ) GDT Price Index at 1430 GMT. However, the main event risk for the NA traders is likely to be the US Services PMI reports from both Markit as well as the ISM (due around 1500 GMT). At the same time, the US JOLTS Job Openings data for September will be reported.
Towards NY close, the US weekly Crude Stocks data by the American Petroleum Institute (API) will be published at 2130 GMT, soon followed by the NZ Employment data, scheduled at 2145 GMT, that will wrap up a busy NA session on Tuesday.
Besides the macro news, the US-China trade developments will play a pivotal role in driving the market sentiment.
EUR/USD: Bearish outside day despite easing of US-China trade tensions
The EUR/USD pair is looking heavy, having carved out a bearish outside day (candle pattern) on Monday despite the trade optimism and the risk-on mood in the financial markets. On the data front, the focus is on the US ISM Non-Manufacturing PMI.
GBP/USD: On its way to third daily loss ahead of UK Services PMI
Aside from the trade positive sentiment, the recent uncertainties surrounding the UK PM Johnson’s victory in the snap election also weigh on the GBP/USD pair as it trades on the back foot below 1.2900 ahead of the London open.
US Service Sector October PMI Preview: That turned corner must be around here somewhere
Services PMI forecast to rise after September’s three year low. Manufacturing PMI recovered in October from decade trough but still weaker than expected. Payrolls maintained strength in October, revisions to August and September were robust.
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