The FOMC released their September meeting minutes yesterday and they noted that “downside risks to the outlook for economic activity had increased somewhat” since the meeting in July. The FOMC is still looking for “clarity” concerning the “recalibration” of rate policy, and with this trade uncertainty, it is difficult to determine when this will end. In other words, rates will probably move lower at the next FOMC meeting in October.
Possible breakthroughs on US-China talks have traders removing USD safe haven trades. Economic figures from the EU are still not good with German trade figures showing a drop of 1.8% in exports and French Industrial Production falling 0.9%. Both numbers fell short of estimates. As the market covers many of their short positions, the EUR may fall into the overbought level.
The odds are increasing that there will be no deal made before the October 31 deadline. UK GDP were disappointing, reviving recessionary fears in the UK. UK Prime Minister Johnson will be meeting with Irish Prime Minister later today in an attempt to salvage some sort of Brexit deal. Expect the pound to react to any news release with traders continuing to be pessimistic that any deal will be reached.
Traders seem to have temporarily left the JPY and are focusing on other currencies in the near term. Some safe haven trades have been put on lately, as traders remain cautious ahead of the high-level trade talks. Any surprises here could see traders returning to the JPY as a safe haven alternative.
The Canadian Dollar moved higher as FOMC minutes point to another US rate cut in October. Despite the move lower in Crude oil prices, which usually weigh on a commodity-based currency, the Loonie has found some support. The Canadian dollar tends to react to US economic news, and traders will be watching US consumer inflation reports.
Trade talk concerns dominated overnight trading as conflicting reports concerning Thursday’s meetings were released. The initial comments from the South China Morning Post, said that no progress had been made in deputy level talks earlier this week. The Post also stated that China’s Vice Premier Liu would now only stay one day, and that the Chinese delegation would be leaving Thursday, instead of Friday. Technology transfers are the reason that the talks have hit a roadblock, as China has refused to add this to the subjects discussed. The White House originally said that the overnight report was inaccurate, with Liu expected to leave on Friday and attend a dinner along with the delegation on Thursday evening.