The risk-off sentiment remained at full steam in Asia this Thursday, mainly in response to the reports of a potential delay in the US-China trade deal. Meanwhile, the US Congress approval of the Hong Kong bill also worsened the market mood further, as markets moved past the cautious FOMC minutes. The risk-off action in the Asian equities, Wall Street futures and Treasury yields offered temporary respite to the US dollar while most majors traded in thin ranges. Gold prices lacked a clear direction around 1470 levels.
Across the fx board, most majors bounced-off their session lows, with USD/JPY back above 108.50, Aussie re-attempted 0.6800 and Kiwi near daily tops of 0.6420. The upbeat comments on the trade deal from China’s Vice-Premier Liu He helped the risk assets to recover some ground, although the sentiment remained fragile, especially in light of US President Trump expected to sign the Hong Kong bill in law. Among others, the USD/CAD pair erased gains and tested the 1.33 handle despite weaker oil prices.
Heading into the European open, both the EUR/USD pair and Cable are trading better bid, although awaits fresh trading impetus ahead of the European Central Bank (ECB) minutes.
Main Topics in Asia
US-China headlines
Four sources close to phase one talks… - CNBC
US Pres. Trump: Do not think China is stepping up to the level I want in trade talks
US House approves Hong Kong bill, sends to White House
Trump expected to sign Hong Kong bill into law, various trade headlines weighs on risk sentiment
China’s Vice-Premier Liu: “Cautiously optimistic” about reaching a trade deal
China State Think Tank: Hong Kong issue is definitely a negative factor in trade talks
Hong Kong Govt: We are strongly opposed to the passage of the Hong Kong bill in the House
Other key headlines
BOJ holds 43.5% of all outstanding Japanese government debt
German FinanceMin: German exports stabilized, but trade risks remain
AUD bearish: Moody's downgrades Australian states' outlook to 'negative'
China's Premier Li: Chinese economy has maintained stable performance this year
IMF’s Georgieva: We should move from trade truce to trade peace
Key Focus Ahead
Amid a data-light EUR calendar, the Indonesian monetary policy decision and Swiss Industrial Production, both due at 0730 GMT, will be eyed ahead of the key ECB’s latest meeting’s minutes, dropping in at 1230 GMT. In the meantime, the speeches from the ECB policymakers Mersch and De Guindos and the UK politics will grab some attention, as the main market driver is likely to remain the US-China trade and political developments.
In the NA session, a fresh batch of US second-tier data will be published at 1330 GMT, including the weekly Jobless Claims and Philly Fed Manufacturing Index. At the same time, the Canadian ADP Employment Change data, Fed’s Mester’s speech and BOC Governor Poloz speech are also due for release. Later in the session, all eyes will be on the US Existing Home Sales data and Eurozone Consumer Confidence figures dropping in at 1500 GMT. Also, of note remains the speech by Fed’s Kashkari and Canadian Financial System Review later on around 1530 GMT.
EUR/USD: Bearish hammer on D1 ahead of ECB minutes
EUR/USD is looking heavy ahead of the minutes of the European Central Bank's (ECB) October policy meeting, which are expected to show the members stand divided on which course to take. Waning trade optimism will likely keep the EUR on the defensive.
GBP/USD turns positive above 21-DMA as challenges to Tories recede
With the Tory supporters paying little heed to the previous day’s ITV debate, not to forget a surprise turnaround in the opposition Labour party loyalists, GBP/USD trades better bid above 1.2900 while heading into the London open on Thursday.
Gold looks heavy with signs of indecision on the daily chart
Gold could slip into losses as technical charts are indicating the recovery rally has run out of steam. The market sentiment is still quite bearish as the metal is struggling despite US-China political tensions.
US existing home sales preview: Sales follow mortgage rates
Existing home sales expected to improve in October after September’s unexpected decline. Largest US housing category has recovered this year following January’s sharp fall. Home sales have climbed as mortgage rates have declined.
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