Daily Market UpdateOctober 10, 2019
EUR/USD ranged from the high 1.09’s to the low 1.10’s overnight. The pair has advanced to a fresh 3-week high of 1.1033, holding nearby ahead of Wall Street’s opening. The intraday rally was in part triggered by US-China trade-related news, following headlines indicating that US President Trump is willing to grant some concessions to China to reach a deal, although it’s hard to consider news positive. The markets are all about positioning and caution ahead of official news.
The market is ignoring negative data coming from both shores of the Atlantic. In the EU, Germany released its August Trade Balance, which posted a smaller-than-expected surplus of €18.1B vs the previous €20.5B. The US, on the other hand, released Initial Jobless Claims for the week ended October 4, which came in better-than-anticipated at 210K, and the final version of September inflation, with the core annual CPI resulting at 2.4% as expected, although the monthly figure missed by raising just 0.1%.
In London, the government’s position remains that the UK must leave the EU on October 31 – three weeks from today. Andrea Leadsom, the business secretary, suggested that it would be perfectly reasonable for the PM to obey the Benn Act and ask for an extension to Brexit while sending another letter asking the EU to reject it. The opposition fears that her words may turn into policy.
Parliament is currently suspended until the Queen’s Speech on Monday, and both parties are gearing up to an emergency debate on Saturday, October 19. Johnson asked for the special sitting – right after the crucial EU Summit on October 17-18 – where he may present a deal. It will also allow MPs to press him to ask the EU to delay Brexit. The day is the deadline for requesting such an extension.
In the meantime, GBP/USD is rising due to the US Dollar’s weakness. Hopes for a US-Sino trade deal have pushed the safe-haven Greenback lower. The world’s largest economies may agree to control the yuan’s movements and refrain from new tariffs. Closely-watched high-level talks are due today.
The USD/JPY pair extended its daily rally in the early trading hours of the American session and rose to 107.65. As of writing, the pair was trading at 107.63, adding 0.15% on a daily basis.
Reports of China buying record volumes of pork from the United States just when high-level US-China trade negotiations started in Washington seems to be providing a boost to the market sentiment and weighing on safe-haven assets such as the JPY. The 10-year US Treasury bond yield, which was flat on the day an hour ago, turned north on this headline and was last up 1% on the day.
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