- Few, but negative, news concerning the US-China trade deal escalated risk-off moves.
- Brexit uncertainty prevails amid a wait for the EU’s response to Brexit extension, UK PM’s reaction.
- Light data calendar saw NZ trade numbers, second-tier data from the US/Canada up for publishing.
With the light economic calendar and thin news flow, forex market extends previous risk aversion ahead of the European open on Wednesday. Brexit/Trade continues to be the key catalysts while International Monetary Fund’s (IMF) Asian growth outlook cut and the Reserve Bank of New Zealand (RBNZ) policymaker’s support for further rate cuts added to the risk-off mood.
Having said that, the US Dollar (USD) keeps its gains while the Japanese Yen (JPY) and Gold also benefit from the investors’ rush to safety. Dollars of Australia, New Zealand and Canada decline amid trade pessimism while the Euro (EUR) and the British Pound (GBP) keep bearing the burden of pessimistic political headlines. Among them, speculations that the United Kingdom’s (UK) Prime Minister (PM) Boris Johnson may call a snap election and the European Council’s signal that nearly five economies to breach the region’s fiscal rule grabbed market attention. Additionally, the US Department of Commerce’s (DOC) proposal for investigating China’s aluminum exports, coupled with downbeat comments from the White House Economic Adviser Larry Kudlow, earlier were in the spotlight.
Main Topics in Asia
Key Focus Ahead
Except for the EU’s Consumer Confidence numbers, US Housing Price Index, Canadian Wholesale Sales and weekly Crude inventory numbers from the US Energy Information Administration (EIA), the economic calendar is almost light. As a result, investors will continue to search for trade/Brexit headlines for fresh impulse.
While the widely anticipated three-month Brexit extension from the European Union (EU) recently gained criticism from France, markets await the UK PM Johnson’s reaction to the same as he previously said to call a snap election if such an outcome arrives. On the trade front, China is yet to respond to the US DOC’s proposal for anti-dumping investigation and the same would invite repercussions from the US, which in turn could add global pessimism.
EUR/USD's breakout above the 100-day MA was short-lived. German 10-year yield dropped four basis points on Tuesday. Focus today is on EU's consumer confidence data and German yields.
GBP/USD is on the defensive, having breached the crucial 50-hour MA support. Cable could suffer a deeper drop in Europe on lingering Brexit uncertainty and risk-off mood in markets.
USD/JPYbears take control and bust down below the 200-hour MA. It was Brexit stealing the show overnight, weighing on US yields and risk.
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