Forex Today: Renewed trade optimism boosts risk; focus on German data, Brexit

Fresh optimism on the US-China trade front on likely US-China trade talks in October offered an additional boost to the risk sentiment in Thursday’s Asian trading.  Both the US and Chinese trade teams confirmed about the trade progress, which saw the anti-risk Yen downed across the board alongside the safe-haven gold.

Across the G10 currencies, USD/JPY jumped nearly 40-pips to two-week highs of 106.75 after the US equity futures and Treasury yields extended gains on trade headlines. AUD/USD jumped beyond the 0.68 handle while the Kiwi rose to weekly highs of 0.6380 despite the report that Fonterra will freeze pay and scrap bonuses of its employees. The resource-linked Loonie held onto less dovish Bank of Canada’s (BOC)-led gains close to 1.32 handle. Both crude benchmarks consolidated the previous surge while Gold prices fell back to 1540 levels amid risk-on.

Heading into Europe, the EUR/USD pair stalled its upside on 1.10 handle amid broad USD comeback. The Cable fell back below the 1.2250 level ahead of the Brexit debate while the Swiss Franc slipped vs. the greenback to near 0.9850 region.

Main Topics in Asia

UK PM Johnson attacks Jeremy Corbyn for 'refusing' to take part in general election – ITV

Trade wars: U.S. Commerce Department said that it imposed duties on Chinese steel

UK's legislation to stop no deal Brexit will be complete by Friday - Media reports

US signals it may block France's Iran plan as it offers millions to boost pressure – CNN

PBOC sets Yuan reference rate at 7.0852

China's Commerce Ministry: China, US to hold trade talks in early October in Washington

USTR: US Treasury Sec. Mnuchin, Vice Premier Liu He spoke on US-China trade talks

Australian trade balance: AUD 7.268bn vs the expected AUD7.4 bn surplus 

NZD Bearish: New Zealand's Fonterra to freeze pay, scrap bonuses of 7,000 employees

US-German two-year yield spread hits lowest since October 2017

AUD bullish: Dalian iron-ore rallies 4% on China stimulus hopes

Indonesian Consumer Confidence dips to 123.1 in Aug

Asian stocks rise on renewed trade optimism and easing fears of hard Brexit

Key Focus Ahead

The immediate focus is on the Swiss Q2 GDP release and German Factory Orders due on the cards at 0545 GMT and 0600 GMT respectively. The Swiss economy is likely to have slowed its pace of expansion in the second quarter while the German factory orders are likely to fall 1.1% in July. At 0700 GMT, the European Central Bank (ECB) Vice President De Guindos speech will be closely heard ahead of next week’s ECB policy meeting. The UK docket remains empty and hence, the Brexit-related developments will continue to steal the limelight. All eyes will be on the UK Court hearing on forcing no-deal Brexit and the House of Lords debate for fresh impetus.

The NA session is packed with a host of US macro releases, including the weekly Jobless Claims, ADP Employment Change, Markit Services PMI, ISM Non-Manufacturing PMI and Factory Orders data. Further, the Energy Information Administration (EIA) weekly Crude Stock data will be reported at 1500 GMT.  

Markets also look forward to the speeches by the Bank of England (BOE) policymaker Tenreyro and BOC board member Schembri while fresh US-China trade headlines will continue to remain the main market driver.    

When are the German Factory Orders and how could they affect EUR/USD?

That the German economy is experiencing a slowdown is generally accepted by now and priced to a greater extent. The common currency will likely rise toward the resistance at 1.1064, as suggested by the daily chart if the Factory Orders match or beat estimates. 

GBP/USD retraces ahead of Brexit debate in the House of Lords

GBP/USD buyers catch a breath after fuelling the quote on receding odds of the no-deal Brexit. Developments at the House of Lords, trade headlines and the US data will together offer a busy day ahead.

US Services Purchasing Managers’ Index: The recessionary turn approaches

Service PMI projected to climb slightly in August. Index has been ebbing since October 2018’s post-recession high. The US/China trade dispute impact is rising.