· The Japanese yen edged higher on Thursday, heading for its biggest monthly rise since May as risk appetite remained on the back foot with investors skeptical on the prospect of a trade-war breakthrough any time soon.
Against the greenback JPY=EBS, the yen edged 0.2% higher at 105.83 yen. For the month, it is set to gain 2.5% against the dollar, putting it on track for its biggest monthly rise in three months.
· Spreads between 10-year U.S. Treasury debt and comparable two-year bond yields inverted to minus 3 bps, its lowest since May 2007.
· Sterling remained in the spotlight after Prime Minister Boris Johnson's plan to suspend parliament raised the odds of a no-deal Brexit. The British currency GBP=D3 edged a quarter of percent lower at $1.2183, approaching a January 2017 low below $1.2015.
· Chinese President Xi Jinping will deliver a major speech to mark 70 years since the official founding of the People’s Republic of China, the government announced on Thursday.
The speech on Oct. 1 will be accompanied by a national day parade showcasing China’s advances in military technology, Wang Xiaohui, executive vice minister for the Communist Party’s Publicity Department, said at a press briefing in Beijing. “The purpose is to motivate and mobilize the whole party, the whole military, and all of the people to unite closely around the CCP Central Committee with Xi at the core,” Wang said.
The speech will be closely watched for hints on China’s policy direction, especially with the nation facing pressure on multiple fronts, from the trade war with the U.S. to protests in Hong Kong to a slowing domestic economy. Xi is expected to review the nation’s achievements over the past 70 years and also talk about China’s future.
· Eighteen months into the trade battle with President Donald Trump, China has come to terms that it’s fighting a forever war as conflicts have spread well beyond trade.
China is preparing for a battle that could be as long as the U.S.-Japan trade war in the 1980s that lasted more than a decade, according to Yi Xiong, China economist at Deutsche Bank.
“We think China is neither aiming to quickly reach a trade deal, nor trying to hit back at the U.S. as hard as it can,” Xiong said in a note Wednesday. “China’s current strategy likely has a long time horizon embedded in it. The time horizon may also go beyond the life cycle of the current U.S. administration.”
· Italy’s head of state is expected to give two former political enemies the chance to form a new government on Thursday, capping an extraordinary three weeks that could mark a turning point in its frayed relations with the European Union.
President Sergio Mattarella meets Prime Minister Giuseppe Conte at 9.30 a.m. (0730 GMT) on Thursday, and is expected to hand him a fresh mandate to put together a new coalition of the 5-Star Movement and opposition Democratic Party (PD).
In an early, basic draft of a coalition policy platform, the two sides would ask the EU for flexibility on the 2020 budget deficit to “reinforce social cohesion” in the country, financial daily Il Sole 24 Ore said on Thursday.
· Italian Prime Minister Giuseppe Conte was given a mandate to form a new government Thursday, as the opposition Democratic Party (PD) set aside its differences with the anti-establishment Five Star Movement (M5S) to form a new left-leaning coalition.
· A Bank of Japan board member warned of potential dangers if the central bank’s already massive stimulus is ramped up, a view suggesting there is no consensus on how quickly it should ease policy again to head off the risk of recession.
Hitoshi Suzuki, a former commercial banker turned BOJ policymaker, said on Thursday borrowing costs have yet to reach levels considered as the “reversal rate” - or the level at which the demerits of low interest rates exceed the benefits.
“I don’t see the need to ease monetary policy further now,” Suzuki told reporters after meeting business leaders in Kumamoto, southern Japan.
· China sent a fresh batch of troops into Hong Kong on Thursday, and its military issued a statement saying its Hong Kong Garrison will “resolutely follow” the central government’s instructions.
Earlier, state media reported that troops from the People’s Liberation Army (PLA) had moved into Hong Kong. The military’s moves were described as routine.
· Oil prices fell on Thursday for the first time in three days after San Francisco Federal Reserve President Mary Daly sounded a note of concern about the strength of U.S. economy.
Brent crude LCOc1 was down 31 cents, or 0.5%, at $60.18 a barrel by 0638 GMT while U.S. crude CLc1 was down 18 cents, or 0.3%, at $55.60 a barrel. Oil prices rose around 1.5 percent in the previous session.
Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, along with the potential hit to oil demand, are keeping prices in check.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are stalling below falling trend resistance capping the upside since late April, now at 57.59. Breaking above that on a daily closing basis targets the 60.04-84 area next. Alternatively, a reversal below the August 26 low at 52.96 paves the way to revisit support near the $50/bbl figure.
Reference: CNBC, Reuters, Daily FX
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