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Dollar Support Kicks in as Market Risk Appetite Sinks

Trade war jitters return, weighing on the equity markets and commodity currencies, Trump’s 2nd general assembly speech tomorrow of little comfort.

Earlier in the Day:

There were no material stats released through the Asian session this morning, with China and Japan on holiday, leaving the markets to consider geo-political headwinds and key events and stats scheduled for the week, along with the rollout of tariffs on $200bn worth of Chinese goods later today.

At the time of writing, the Japanese Yen was flat at ¥112.59, pinned back by a stronger U.S Dollar, with the Aussie Dollar and the Kiwi Dollar also in the red, risk aversion at the start of the week hitting the pair as trade war jitters return to the markets ahead of Trump’s address to the General Assembly at the UN on Tuesday.

In the equity markets, the ASX200 was down 0.27%, with over half of the 200 listed in the red in at the start of the week, sliding mining and metals stocks doing the damage early on, an rally in crude oil prices providing little support. Things were not much better for the Hang Seng that opened down 1.07%, the shift in sentiment hitting the tech sector once more, with Tencent down 1.5% at the open, with bank stocks also seeing heavy losses early on.

The Day Ahead:

For the EUR, key stats scheduled for release are limited to August business sentiment numbers out of Germany. The Ifo Business Climate Index is forecasted to soften, with both the Business Expectations and Current Assessment numbers also forecasted to be on the softer side, which would be in line with recent stats out of Germany that have disappointed.

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Outside of the numbers, ECB President Draghi is scheduled to speak this afternoon that could influence direction should any references be made to policy, Draghi having skirted the subject in speeches following the latest ECB press conference.

At the time of writing, the EUR was down 0.03% to $1.1745, with today’s stats and Draghi to provide some direction, while risk sentiment will likely be the key driver through the day.

For the Pound, it’s a quiet day on the data front, with stats limited to CBI Industrial Trend Order figures for September that are forecasted to be Sterling negative. While we can expect a reaction to the numbers, stats are likely to continue to be overshadowed by market sentiment towards Brexit, the British Prime Minister meeting the cabinet later today for the first time since last week’s Austrian debacle.

Outside of the stats the BoE Financial Stability Report due out later this morning will also provide some direction, as the FCP identifies key risks to the global and UK economies, with the prospects of a no-deal exit from the EU likely to be a key component of the report released by the FCP. With BoE Governor Carney amongst the Committee members, it may not be pleasant reading if his last session with Cabinet ministers is anything to go by…

At the time of writing, the Pound was up 0.08% to $1.3083 with Brexit and the BoE’s Financial Stability Report the key drivers for the day.

Across the Pond, there are no material stats scheduled for release out of the U.S, leaving the Dollar in the hands of market risk sentiment and noise from the Oval Office, Trump at the UN today ahead of his speech to the General Assembly tomorrow that is likely to focus on foreign policy and putting America first.

At the time of writing, the Dollar Spot Index was up 0.01% to 94.225, a lack of stats putting the Dollar firmly in the hands of the U.S President before focus shifts to FED policy ahead of Wednesday’s anticipated rate hike and, of greater significance, release of the economic projections.

For the Loonie, economic data scheduled for release is limited to July wholesale sales that is forecasted to recover from June’s slide. The numbers are unlikely to have a material impact on the Loonie however, with the markets likely to remain focused on NAFTA talks, Trump and Trudeau at the UN this week, which could lead to some meetings on the side lines in the interest of progress as the latest NAFTA deadline rapidly approaches.

At the time of writing, the Loonie was down 0.08% to C$1.2926 against the U.S Dollar.

This article was originally posted on FX Empire

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