UK Markets close in 2 hrs 55 mins

It’s All Eyes on Washington as Trade Talks Resume Later Today

Bob Mason

Earlier in the Day:

It was a relatively quiet day on the economic calendar through the Asian session this morning.

The Aussie Dollar was in action, with October consumer confidence and August home loan figures providing direction early on.

On the geopolitical risk front, news of China being supportive of a trade agreement failed to spur demand for riskier assets. Trade tensions have been on the rise and China’s support of an agreement comes with a caveat that no further tariffs are introduced.

With talks set to resume later today, some caution was to be expected…

For the Aussie Dollar

The Westpac Consumer Sentiment Index fell by 5.5% to 92.8 in October, reversing a 1.7% rise in September.

According to the Westpac report,

  • The slide came in spite of the RBA’s latest rate cut, which will be of concern when considering the reliance on consumer spending.
  • Global events, including deteriorating U.S – China trade relations, contributed to the weakest confidence since July 2015.
  • Looking at the numbers:
    • The sub-index for family finances vs a year ago fell by 4.9%, with finances for next 12-months down by 3.7%.
    • Economic conditions next 12-months slid by 6.0%, while economic conditions next 5-years slumped by 9.1%. The next 12-months sub-index was down 15.1% year-on-year, while the next 5-years was down by 6.4%.
    • The time to buy a major household item sub-index fell by 4.2% following last month’s 2.8% decline.
    • On the labor market front, the Unemployment Expectations Index fell by 1.3%, while up by 7.3% year-on-year.
    • The Time to buy a dwelling index fell by 5.4%, whilst rising by 13.7% over the year. By contrast, the House Price Expectations Index rose by 5.9%.

The Aussie Dollar moved from $0.67150 to $0.67141 upon release of the figures that preceded the home loan numbers.

Home loans rose by 1.8% in August, following on from a 5% jump in July, according to the ABS. Economists had forecast a rise of 3.6%.

The Aussie Dollar moved from $0.67172 to $0.67165 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.10% to $0.6718.

Elsewhere

At the time of writing, The Japanese Yen was up by 0.16% to ¥107.31 against the U.S Dollar, while the Kiwi Dollar down by 0.0.06% to $0.6289.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar, with German trade data due out of the Eurozone in the day ahead.

Following factory orders and industrial production figures from earlier in the week, the data would need to impress to support the EUR.

On the geopolitical front, Brexit will also be a factor along with any chatter on trade, as trade talks resume later today.

At the time of writing, the EUR was up by 0.10% to $1.0982.

For the Pound

It’s a busy day ahead on the data front. Economic data includes August industrial and manufacturing production, GDP numbers and trade data.

We would expect the manufacturing production and GDP figures to have the greatest influence on the day.

On the geopolitical front, Brexit will continue to be a key driver, however. With EU Summit just over a week away, we can expect the Pound to be particularly responsive to any updates from the EU or Westminster.

From earlier in the day, the UK’s RICS House Price Balance for September had a muted impact on the Pound.

According to the latest survey, the RICS House Price Balance Index rose from -4% to -2% in September.

At the time of writing, the Pound was up by 0.06% to $1.2213.

Across the Pond

It’s a relatively busy day ahead on the economic calendar, with inflation and initial jobless claims figures due out of the U.S later today.

While we can expect the Dollar to respond to the numbers, market sentiment towards the U.S and global economy and geopolitical risk will remain the key drivers.

Any pickup in inflationary pressure is unlikely to shift sentiment towards monetary policy near-term. FED members have become concerned over a likely softening in inflationary pressures. Consumer prices are forecast to rise by 0.2% in September, softer than a 0.3% rise in August.

Jobless claims figures will take a backseat on the day, barring an unexpected rise in claims. The Dollar would need initial weekly claims to hold at sub-230k levels to avoid a sell-off.

The Dollar Spot Index was down by 0.07% to 99.052 at the time of writing, with the overnight FOMC meeting minutes weighing early on.

For the Loonie

It’s a quiet day on the economic calendar. Economic data is limited to August house price figures. Barring particularly dire numbers, we would expect the numbers to have a muted impact on the Loonie.

On the day, the OPEC meeting’s influence on crude oil prices and sentiment towards the global economy will provide direction.

Economic data from the Eurozone and the U.S suggest that a further cut in OPEC output and supply is required.

The Loonie would need the hope of a near-term end to the U.S – China trade war and a cut in the supply crude oil to find support.

The Loonie was down by 0.07% at C$1.3342, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

More From FXEMPIRE: