With holidays in China, HK and Australia today, and a typhoon in Tokyo, its been tough to get a good feel of local Asia markets given the diminished liquidity. So, the focus has been primarily on the G-10 with the Canadian Dollar hogging the spotlight.
The Canadian Dollar
The Canadian dollar has run into profit-taking at 1.2800. We should trade well into n the 1.2700 handles sooner than later. But after this morning’s aggressive move lower, and the lack of a convincing follow through in London, it does appear traders are curbing their enthusiasm. There’s a growing sense were not entirely out of the weeds just yet, and since there will be a considerable period before the deal as ratified, Asia and London’s traders are tentatively waiting for their Canadian colleagues to grab the baton where the order books should be busy on both sides of the ledger.
During little more than one week, the Euro has gone from eyeing the 1.20 penthouse to now facing the reality of the 1.15 outhouse. The Italian budget has hit another bump in the road as Repubblica reports the EU will dismiss the proposal as inadequate. Talk about adding insult to injury as EU policymakers including the ECB had convinced the market it was business as usual and Italy was running effortlessly, now traders will be sitting nervously anxious until the budget is submitted on October 15.
The British Pound
The UK manufacturing PMI for September has risen to 53.8 versus 52.5 expected. GBPUSD has shown an only limited reaction to the data and trades around the 1.3050 level. Cable is stuck in a broader range still getting knocked around by various Brexit headlines. It’s impossible to filter out the political nose so best to remain cautious on GBP as it’s tough to predict next rate move hence the market is entirely tuning out the data.
The Japanese Yen
Not too unexpectedly with the NKY touching multi-decade highs, USDJPY has breached the 114.00 level. But not the tough part starts as the markets pivots to Friday NFP, Yes, I know its only Monday, but Friday report will take on the tremendous importance for near-term USD momentum.
Local Asia markets
China’s September manufacturing data released over the weekend cast a very gloomy shadow over local sentiment. The export components shrunk at the fastest pace since February 2016. Indeed, trade frictions are to blame. Equity markets that are open are trading mixed as the US 10y yield are back up at 3.07, and predictably USD Asia moved higher. While tariffs are causing some fraying at the brick and mortar level, China continues to support the demand side of the equation so while the manufacturing PMI is weak; we could expect some immediate damage control from both the fiscal and monetary policy tweaks, so by no means is the damage irreparable.