A Quiet Economic Calendar Leaves Geo-Politics Front and Center
Earlier in the Day:
There were no material stats released through the Asian session this morning to provide direction, leaving the markets to consider the events of last week and what lies ahead for the week.
The Saudi’s explanation of Kashoggi’s death in the Saudi consulate in Turkey was ill-received, leaving the markets to consider what actions the U.S might take in response, which has led to speculation of sanctions that could get messy for oil prices, the Saudis more than capable of responding with a cut back in production to hit the markets.
While the U.S futures were in the red in the early part of the day, the risk off sentiment weighing ahead of the opening bell in China, a rally in the Chinese equity markets shifted the mood, with the CSI300 up 3.69% at the time of writing, the Hang Seng following with a gain of 1.72%. The opening rally supporting a partial recovery in the Nikkei, which was down just 0.31% mid-morning, while the ASX200 continued to struggle, down 0.52% as the financial sector weighed, with oil and mining stocks also seeing red as concerns over the ongoing trade war and impact on the global economy linger.
In the currency markets, the Aussie Dollar and the Kiwi Dollar were down 0.13% and by 0.02% respectively, with the Japanese Yen down 0.04% against the U.S Dollar, in what’s been a relatively range bound start to the week, the Aussie Dollar the victim of the session.
The Day Ahead:
For the EUR, there are no material stats scheduled for release through the day, leaving the markets to look towards Brussels, the European Commission and the Italian coalition government who are due to respond to the European Commission’s letter on its budgetary plans. For the EUR, it’s the first major test since 2015, the markets wary of getting the first taste of a populist government that has the capability of calling for a withdrawal from the EUR.
The spread between Italian and German bond yields will be watched closely, any widening towards the 400 basis point line in the sand likely to add pressure on the EUR.
At the time of writing, the EUR was down 0.01% to $1.1513, geo-political risk the key driver.
For the Pound, there are no material stats scheduled for release through the day, with a quiet week ahead on the data front leaving the Pound in the hands of Brexit chatter. British Prime Minister May is scheduled to address the Commons later today on progress and on the possibility of extending the transition period. With Tory backbenchers looking for a vote of no confidence, it could be an interesting session and that’s before any possible comments from EU member states in response to May’s address.
At the time of writing, the Pound was down 0.03% to $1.3072, with Brexit the key driver.
Across the Pond, a lack of economic data through the day leaves the Dollar in the hands of the Oval Office and noise from Brussels.
The markets will be expecting some chatter over the killing of journalist Kashoggi, with also investors looking out for any negative effects from the ongoing trade war between the U.S and China on corporate earnings, which could make the mid-term elections interesting, Trump’s strategy to bring China in line with making America great again yet to have succeeded.
At the time of writing, the Dollar Spot Index was down 0.04% to 95.676.
For the Loonie, August wholesale sales will provide some direction later in the day as the markets prepare for Wednesday’s BoC monetary policy decision and outlook on rates.
Outside of the stats, market risk sentiment and the direction in crude oil prices will also influence.
The Loonie up 0.08% to C$1.3094 against the U.S Dollar at the time of writing.