Daily Market UpdateOctober 09, 2019
EUR/USD ranged from the mid to high 1.09’s overnight. EUR/USD pair has recovered from a weekly low of 1.0940, backed by US-China trade talks positive headlines, although the positive momentum eased ahead of the critical 1.1000 resistance. Speculative interest remains on its toes amid US-China trade talks, with related headlines moving sentiment back and forth. The latest news indicate that China is open to making a deal with the US, despite Trump’s administration canceling vista to authorities and adding companies to a blacklist.
Meanwhile, US Federal Reserve Chief Jerome Powell spoke late Tuesday and said that the central bank restarting its Treasury purchases was “in no way” the same as post-crisis quantitative easing, although it clearly affected the greenback negatively, as it’s quite alike. Powell will speak again today, while mid-US afternoon, the FOMC will publish the Minutes of its latest meeting. It seems unlikely that the pair would be able to move far away from the current levels ahead of Fed-related events.
The Times reported that the EU is ready to offer the UK a major concession – allowing a time-limit on the Irish backstop – news that sent the pound rallying.
However, the diplomatic sources say that bloc conditions this unilateral revocation of the withdrawal treaty only if both communities in Northern Ireland agree to it. The offer takes away the veto that Prime Minister Boris Johnson was willing to give the Democratic Unionist Party (DUP) under his plan. The party is unlikely to support the move. Moreover, hardline Brexiteers in Johnson’s Conservative Party oppose any Irish backstop – even if it can be ditched in 2025.
GBP/USD, which nearly reached 1.23 on the news, could head back down and return to its gloom.
The gloom originates from an unfruitful telephone conversation between the PM and German Chancellor Angela Merkel on Tuesday may have closed the door on reaching a Brexit deal by the EU Summit on October 17. A source at 10 Downing Street said that Merkel demanded the UK accept keeping Northern Ireland (NI) in the EU’s customs union and Johnson reached the conclusion that a deal is impossible at this juncture.
After closing the previous day a little below the 107 handle, the USD/JPY pair reversed its direction on Wednesday as the improving market sentiment made it tough for the safe-haven JPY to preserve its strength. As of writing, the pair was up 0.27% on a daily basis at 107.36.
Reports of China being open to making a partial trade deal with the United States (US) on Wednesday allowed risk-on flows to dominate the market action. Major European equity indexes rose sharply on these headlines and the 10-year US Treasury bond yield gained traction to confirm the upbeat market mood. Additionally, Wall Street’s main indexes opened the day decisively higher.
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