· The euro rose as the dollar weakened and the Swedish crown plunged to a 10-year low against the euro as hopes waned for a breakthrough in U.S-China trade talks.
The resulting risk aversion had bolstered the dollar, which is considered a safe haven, but after it began to fall against the euro in the early trading in Europe.
Investors also took into account remarks by Federal Reserve Chairman Jerome Powell that he was open to further interest rate cuts and bond purchases.
The euro was up 0.2% at $1.09785. The index that tracks the dollar against a basket of six other currencies was down 0.1% at 99.007.
Elsewhere, the pound was slightly higher, though not far from the one-month low it reached the day before. Sterling was up 0.2% at $1.2237 and flat against the euro at 89.78 pence .
· US Dollar Price Volatility Report: FOMC Minutes & Powell Eyed
Markets remain on edge ahead of US-China trade talks set to kick off later this week. Terse headlines lobbed back and forth between Beijing and Washington has dented risk appetite, which is likely serving as a tailwind to US Dollar price action. The US Dollar is also gaining more broadly amid notable downside in GBP/USD and EUR/USD owing to the ongoing impasse between London and Brussels that is raising the risk of no-deal Brexit.
Also contributing to the greenback’s performance today included a much better-than-expected US small business optimism report and the latest commentary from Federal Reserve officials. Looking ahead to Wednesday’s trading session and for catalysts outside of trade wars, another speech from Fed Chair Powell is on deck in addition to the release of the September FOMC minutes – all of which stand to spark volatility in the US Dollar.
US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (APRIL 12, 2019 TO OCTOBER 08, 2019)
The daily publishing of this US Dollar price volatility report has frequently highlighted the 98.75 price level on the DXY Index – a popular basket of major US Dollar forex pairs. I noted that this area of confluence, which is also underpinned by its 20-day simple moving average, had strong potential to keep USD price action afloat.
The US Dollar Index now trades comfortably above this support zone and opens up the door to re-target its year-to-date high near the 99.50 mark. Should the aforementioned support level fail to hold once more, the US Dollar could search for support around 98.25 where the 38.2% Fibonacci retracement and 50-day simple moving average could bolster the greenback.
· Danske Bank analysts point out that the Fed Chairman Jerome Powell (voter, neutral) will speak again today at the 'Fed listens' event in Kansas but will likely not bring much new compared to his speech yesterday.
“Minutes from the latest FOMC meeting will be released tonight . This will give insights into the discussion about the need for further accommodation. However, the meeting took place before the recent weak US service PMI that points to some spill-over to US consumers and the service sector.”
“Also look out for any new comments regarding the upcoming US-China trade talks starting tomorrow in Washington . We may also get more signals regarding possible Chinese retaliation against the US blacklisting of more Chinese companies. However, China may wait until the other side of the trade talks this week before hitting back.”
· China has low expectations that a trade agreement can be reached soon as it heads into high-level talks with the U.S. later this week, according to an editorial in the Communist Party-run Global Times newspaper.
“There are obviously many trade differences between the two countries, the attitude of the U.S. is not sincere, the area of conflict is growing broader, and strategic mutual distrust is increasing,” the piece said. “The U.S. has always emphasized its strengths, but the problem is that its actual advantage is far from supporting its demands on China, and Washington seems to have not understood this.”
The editorial brushed off the U.S.’s decision this week to blacklist Chinese companies connected to the mass detention of Muslims in the country’s far west region of Xinjiang. This is an old strategy of exerting maximum pressure ahead of talks and would have little impact on the focus or will of the Chinese side, it said.
· China is planning tighter visa restrictions for U.S. nationals with ties to anti-China groups, people with knowledge of the proposed curbs said, following similar U.S. restrictions on Chinese nationals, as relations between the countries sour.
New U.S. visa restrictions announced on Tuesday, on Chinese government and Communist Party officials the United States believes responsible for the detention or abuse of Muslim minorities, had bolstered the case for the new Chinese restrictions, one of the sources said.
The tighter restrictions come amid heightened concern in Beijing that the United States and other governments are using such organizations to incite anti-government protests in both mainland China and Hong Kong, and would also be in retaliation for the U.S. visa restrictions against Chinese researchers and officials, the first source said.
· The U.S. government widened its trade blacklist to include some of China’s top artificial intelligence startups, punishing Beijing for its treatment of Muslim minorities and ratcheting up tensions ahead of high-level trade talks in Washington this week.
The decision, which drew a sharp rebuke from Beijing, targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group Ltd and Megvii Technology Ltd.
U.S. officials said the action was not tied to this week’s resumption of trade talks with China, but it signals no let-up in U.S. President Donald Trump’s hard-line stance as the world’s two biggest economies seek to end their 15-month trade war.
· The Trump administration announced two actions against Chinese companies and officials just days ahead of a high-level trade meeting set to take place in Washington on Thursday and Friday.
“You don’t do these things prior to negotiations. It does not set a good tone, that’s tactically. Strategically, all these actions — I think — are causing the Chinese to wonder: ‘What is the US’ real motive here?’” Max Baucus, a former U.S. ambassador to China.
Another issue that could stall the U.S.-China trade negotiation is the ongoing protests in Hong Kong, said William Reinsch, senior advisor and Scholl Chair in international business at think tank Center for Strategic and International Studies.
· Most Democrats want to impeach U.S. President Donald Trump, even if that means weakening their party’s chances of winning back the White House in the 2020 election, according to a Reuters/Ipsos opinion poll.
The poll, conducted on Monday and Tuesday, found that 55% of Democrats said that their party leaders should press ahead with impeachment even “if it means a lengthy and expensive process that could weaken their chances of winning the presidency in 2020.”
And even a higher number - 66% of Democrats - agreed that Congress should pursue impeachment, “even if that means they will need to postpone efforts to pass laws that could benefit me.”
Overall, the poll found that support for impeachment remains unchanged overall among all Americans - holding at 45% since last week. But opposition to impeachment dropped by 2 percentage points from last week to 39%.
· British Prime Minister Boris Johnson is facing a new rebellion from his cabinet over concerns of a no-deal Brexit, with a group of cabinet ministers poised to resign, The Times newspaper reported on Wednesday.
Culture Secretary Nicky Morgan, British Minister for Northern Ireland Julian Smith, Justice Secretary Robert Buckland, Health Minister Matt Hancock and Attorney General Geoffrey Cox are all on a "resignation watch list", according to The Times
· NBA Commissioner Adam Silver said he hopes to meet with Chinese officials this week when he travels to Shanghai for Thursday night’s game between the Los Angeles Lakers and Brooklyn Nets — after a tweet from one of the league’s executives ignited an international firestorm.
Chinese state-run television network CCTV said it was suspending the current broadcast arrangements for the NBA’s preseason games in China, including this week’s game, after the general manager of the Houston Rockets, Daryl Morey, tweeted support Sunday for the anti-government protests in Hong Kong. The fallout has escalated from there as other Chinese companies began severing ties to the National Basketball Association.
Thanks to the NBA, Twitter and a Chinese government that feeds a national “outrage culture,” questionable relationships between American companies and Beijing are getting more attention than ever, writes Jake Novak.
· Oil prices slipped for a third consecutive session on Wednesday as tensions escalated between the United States and China prior to this week’s trade talks, raising uncertainties for global economic growth and oil demand.
U.S. industry data showing a bigger-than-expected rise in stockpiles held by the world’s top oil producer and consumer also depressed prices.
Brent crude futures LCOc1 fell 12 cents, or 0.2%, to $58.12 a barrel by 0656 GMT, while U.S. West Texas Intermediate crude CLc1 was at $52.51, down 12 cents, or 0.2%.
In the United States, meanwhile, crude stockpiles rose by 4.1 million barrels in the week ended Oct. 4 to 422 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected an increase of 1.4 million barrels, a Reuters poll showed.
· Saudi Arabia’s full oil production capacity will be recovered by the end of November, Saudi Aramco CEO Amin Nasser said at the Oil & Money Conference in London on Wednesday. This according to Reuters.
· Crude Oil Prices Outlook
Brent has not deviated from its congestive range, indicating traders are hesitant to commit capital until a clear directional preference is given. However, as outlined in my Q4 forecast, the path of least resistance suggests an underlying downside bias may ultimately overwhelm upside pressure from hints of monetary easing or politically-induced supply disruption fears. Traders may be waiting for key catalysts like the FOMC minutes and upcoming US-China trade talks before it either capitulates or attempts to make a break above $59.34/bbl.
Reference: Reuters, CNBC, FX Street, Daily FX
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