Currency View by OFX

Last week’s news

  • The possibilities of a trade deal between the U.S. and China brought excitement to financial markets last week. The S&P 500 was almost 2% higher on Friday, until the details of the deal were revealed, still the S&P managed to close 1% higher. China apparently agreed to more than double its annual purchases of U.S. agriculture, while the U.S. agreed to not implement its tariffs increase on Chinese imports on Oct. 15th. However, concessions on intellectual property rights still need to be determined. President Trump said it would take up to five weeks to complete “phase one” of the deal. The Aussie dollar was in rally mode hitting an intraday high of 0.6810 and closing the week at 0.6790.
  • Two weeks from Brexit deadline and the saga took a turn for the better last week when Irish and UK PMs had productive one to one talks. They released a joint statement stating that “…they could see a pathway to a possible deal,’ and that this could be,“…done by the end of October.” The British Pound rose over 4% versus the Greenback in a 24 hours window, from 1.2216 to 1.2706. Focus remains on Brexit negotiations this week and volatility for the pound is picking up considerably.
  • Fed Chairman Jerome Powell said that the central bank would remain focused on calming money markets without using “quantitative easing.” He specifically added they would resume purchases of Treasury securities and he explained that he has other options open on interest rates: “…neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve should materially affect the stance of monetary policy.”

Looking ahead

  • Steven Mnuchin, US Treasury secretary, has advised that a new round of tariffs on Chinese goods set for December 15th would be triggered if Beijing fails to finalize the “phase one” deal set by Trump last week. Beijing may send a delegation led by Vice Premier Liu He, China’s top negotiator, to finalize a written deal that could be signed by the presidents at the Asia-Pacific Economic Cooperation summit in mid-November in Chile.
  • The British Pound erased some of its impressive gains after the European Union’s chief Brexit negotiator, Michel Barnier, said that the U.K.’s proposals for a deal lacked detail. Furthermore, the prime minister’s coalition allies, Northern Ireland’s Democratic Unionist Party, also suggested doubts about the plan. And finally, the European negotiators warned that Boris Johnson’s Brexit plan isn’t good enough to be the basis of a deal. To add more drama Jean-Claude Juncker said Brussels should approve an extension past the Oct. 31 deadline if London asks for another delay.
  • UK PM Boris Johnson’s hopes of sealing a Brexit deal in time for a critical EU summit later this week were challenged on Sunday after an intense round of negotiations left Brussels ‘baffled’ about the UK’s new customs proposals. One European diplomat went as far to say that talks this week would be ‘one last chance’ for the two sides to bridge their differences by the time of the EU leaders summit this Thursday.

Key market events this week

  • China Consumer Price Index YoY (Sept) – Tuesday
  • BoE Governor Mark Carney speaks in Parliamentary Testimony –Tuesday
  • EUR Consumer Price Index YoY (Sept) – Wednesday
  • GBP Consumer Price Index Core YoY (Sept) – Wednesday
  • CAD Consumer Price Index YoY (Sept) – Wednesday
  • US Retail Sales Advance MoM (Sept) – Wednesday
  • AUD Unemployment Rate & Change (Sept) – Thursday
  • AUD RBA Governor Lowe speaks in Washington – Thursday
  • US Initial Jobless claims (Oct) – Thursday

 
 

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