With Japan out on a holiday, Asia witnessed a quiet start to a new week, with the market mood cautiously optimistic, as the renewed US-China trade optimism was somewhat outweighed by escalating Mid-East tensions. Therefore, the Asian equities traded mixed while Treasury yields weakened and Oil prices jumped over 1%. Meanwhile, gold prices clocked weekly highs above $ 1520 levels, buoyed by Gulf geopolitical woes.
Amongst the G10 currencies, the Antipodeans were the top performer amid trade relief and broad US dollar weakness. The Kiwi emerged the strongest, with 0.30% gains and 0.6300 back on sight. The AUD/USD pair shrugged-off mixed CBA Manufacturing and Services PMI reports and broke higher towards the 0.68 handle. The Yen, on the other hand, was the main laggard, as USD/JPY held onto moderate gains near 107.75 region. USD/CAD traded on the front foot near 1.3270 levels, as the Canadian dollar was uninspired by the rally in oil prices.
Meanwhile, the EUR/USD pair clung to gains above the 1.1000 level while Cable consolidated below the 1.25 handle amid US-UK trade deal hopes and looming Brexit uncertainty.
Main Topics in Asia
US-China trade updates
China, US had 'constructive' trade talks in Washington - Xinhua
AUD/JPY and AUD/CHF solid in the open on trade-talk relief
Ex-PBOC Gov. Zhou: Trade disputes are seriously threatening global trade and economic growth
Republican Adelson cautioned Trump on trade war with China – WSJ
Chinese theft of trade secrets on the rise, the US Justice Department warns – CNBC
Chinese farm official: 'Good outcome' from trade talks – Yicai
Other key headlines
Tensions in Middle East are on the rise, Oil prices a major focus
NZIER’s Shadow Board divided on where OCR should be - NZIER
US Trump and UK Johnson to meet on Thursday to discuss lightning speed trade-deal - The Sun
US to unveil plan on making Treasury market more transparent - Bloomberg
ECB’s Vasle: Likely need for further action
Key Focus Ahead
It’s a quiet calendar to kick-off the week, mainly dominated by the Markit Flash Manufacturing and Services Purchasing Managers’ Index (PMI) on both sides of Atlantic. The German and Eurozone Manufacturing sector activity will be closely eyed amid the ongoing technical recession. Also, in focus remains the German Buba monthly report due at 1000 GMT.
In the NA session, traders will also await the Canadian Wholesale Sales data due at 1230 GMT alongside the US PMI releases. The main event risk for today remains the testimony by the European Central Bank (ECB) President Draghi before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels, Belgium, at 1300 GMT.
Meanwhile, the geopolitical and trade developments will continue to play a pivotal role in driving the market sentiment.
EUR/USD: Mildly bid, but below key hurdle, focus on Eurozone PMIs
EUR/USD is mildly bid at press time and may gather upside traction in Europe if the preliminary German and Eurozone Purchasing Managers' Indices beat estimates. A weekly close above 1.1086 is needed to boost bullish prospects.
GBP/USD benefits from UK/US trade optimism amid UK politics
GBP/USD stays above 100-day EMA as the US-UK leaders agree over a trade deal by July 2020. Tories keep lagging behind EU’s expectations while the opposition Labour party leader Jeremy Corbyn grabbed the headlines.
Focus: Eurozone manufacturing sentiment
Next week (September 23), a first flash estimate of the manufacturing sentiment of the Eurozone, Germany and France for September will be released. In August, Eurozone manufacturing sentiment brightened slightly for the first time in a long while, but remained at very low levels.
Week Ahead: UN meeting & oil shock, repo spike aftermath
Looking ahead to the week beginning September 23rd the major event of the week is the United Nations General Assembly – or UNGA which could be a pivotal moment for Brexit.
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