Key Points From This Week
GBP has been the standout performer of the week among the G10 currencies as fresh Brexit-deal optimism has seen it rising firmly against USD. On the other hand, JPY has been the worst performing currency in the G10 space as Brexit hopes and optimism for a US-Sino “mini trade deal” have seen reduced safe haven flows.
FOMC Minutes Support Further Cuts
The release of the September FOMC minutes this week revealed that many in the Fed feel recessionary risks have grown over recent months. Although the latest rate cut received some opposition among policymakers, the majority were in favour and some supported a deeper cut. With recent data trending lower across key indicators, recessionary risks have arguably grown, reflected in higher pricing for an October rate cut.
Syria Invades Turkey As US Withdraws
The start of the week marked a sea-change in US policy regarding its involvement in the Syrian/Turkish border issue. Trump announced that the US army had withdrawn from the area ahead of a planned invasion of Syria by Turkey which is looking to establish a safe-zone where it can relocate large number of Syrian refugees currently in Turkey. The invasion has already resulted in civilian deaths at Turkish troops clash with the SDF and the international community is concerned that the conflict will create deeper instability in the area.
Hopes For Brexit Deal
A rollercoaster week for Brexit negotiations started with reports that Johnson’s Brexit deal was dead in the water following a call with Merkel. However, this was countered by reports that EU leaders might be willing to strike a compromise over the Irish backstop issue. Emergency talks between the UK PM and Irish Taoiseach ended on a positive note with the two leaders expressing optimism that a deal could be done, with the UK Brexit secretary heading back to Brussels on Friday for further talks with Michael Barnier.
Key Events Next Week
AUD RBA Meeting Minutes
The RBA eased rates for a third time in five months at it its last meeting and is widely expected to ease further over the coming months. The market is currently looking for a further move by December but will be closely watching the minutes to assess the risks of an earlier-than-expected rate cut in November.
UK CPI
UK Inflation data next week will be the last reading the BOE receives ahead of the current October 31st Brexit date. Recent communication from BOE member regarding the potential for the BOE to cut rates ahead of any Brexit outcome, to protect against the damage from ongoing uncertainty, has weighed heavily on GBP. Any downside surprise here could sharpen focus on such a move, weighing further on GBP.
CNY GDP
Chinese GDP data next week will give a key insight into the health of the Chinese economy. The ongoing trade war has seen lower readings across a slew of global activity indicators. GDP is forest to print fresh 2019 lows of 6.2%, just above the 2009 low of 6.1%. With trade negotiations still ongoing, a weak reading might incentivise the Chinese side to seek a deal.
Keep an eye on
EU Brexit deal Decision
The EU is due to make its decision on whether to ratify Johnson’s newly proposed Brexit deal. The latest updates have seen Johnson displaying renewed optimism for a deal following talks with Irish leader Leo Varadkar. While an official decision will not be made until the EU summit, we are likely to hear headlines and leaked comments over the week signalling which way the EU is likely to go.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!