Daily Currency Update

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US-China trade war continues.

USD - United States Dollar

The U.S.-China trade war tensions still remain at the forefront of the global political landscape. The first phase of a trade agreement is still yet to be finalized before the Asia-Pacific Economic Cooperation summit in Chile in mid-November. There have been further comments from Chinese officials over the past 24 hours claiming they are stepping up efforts to stabilize trade. Their plan is to:
• Increase imports of goods (primarily agricultural products)
• Keep Yuan exchange rate stable
• Continue to stabilize foreign direct investment

While data releases are fairly insignificant in the U.S. this week, Durable Goods Orders and Flash Manufacturing PMIs are scheduled to be released tomorrow. Additionally, with crucial Brexit negotiations ongoing, Chinese officials taking to the media and the ECB rate decision meeting scheduled tomorrow, expect USD currency pairings to still react elastically to market headlines.

Key Movers

It was a mixed day for PM Johnson on Tuesday as GBP/USD dipped from 1.2990 to 1.2860 on the back of a number of votes in parliament. British lawmakers voted by 329 to 299 in favor of Johnson’s Withdrawal Agreement Bill however voted against the proposed fast track Brexit timetable, leaving EU negotiations in limbo. Johnson has paused the legislation talks and is waiting for the EU leaders to make a decision on whether an extended Brexit is once again appropriate. The 3 most likely responses from the EU are:
1. Grant UK extension until Jan 2020.
2. Grant UK ‘flextension’ until Jan 2020 (will have specific T&Cs and allow for the bill to pass through before the proposed deadline.
3. Hold firm on the current proposed Oct 31st deadline.

In other news, EUR/USD retraced from its monthly high of 1.1180, as the market prepares itself for the ECB meeting on Oct 24th and on the back of the ECB’s most recent bank lending survey. The data suggests economic growth in the area is continuing to fall short of the ECB’s projections. Additionally, the EUR/USD pair will be subject to an array of European data releases tomorrow, namely Flash Manufacturing and Flash Services PMIs.

Expected Ranges

GBP/USD: 1.2810-1.2955 ▼

EUR/USD: 1.1070-1.1210 ▼

USD/CAD: 1.3010-1.3185 ▲