USD in Demand
The US dollar has been a little firmer over the European morning so far on Tuesday. Fluctuations in risk appetite around trade war and Brexit headlines continue to impact the safe-haven flows seen for USD.
Fed rate cut expectations are keeping the USD outlook subdued in the near term and this should build heading towards the October FOMC. USD index trades 98.20 last.
EURUSD has been lower against USD today. The latest economic data from Germany (ZEW economic sentiment) came in better than expected. However, it remained in negative territory.
Recent data weakness in the eurozone has kept EUR pressured over recent months. EURUSD is trading 1.1016 last, back below the 1.1025 level.
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GBP Buoyed by Brexit Deal Hopes
GBPUSD has been a little higher today as the market continues to display optimism ahead of the EU summit this week (starts on Thursday). UK and EU leaders have been locked in talks over the last week with sentiment mainly positive.
However, divisions over the Irish backstop issue still pose a risk to a deal. GBPUSD trades 1.2623 last, stalling at the 50% retracement from year to date highs.
SPX500 Still in the Green
Risk assets are trading in the green this morning though momentum has waned. The market was left deflated on news that China is not yet ready to sign the deal agreed upon last week.
The US is now warning that further tariffs will be implemented if a deal is not signed. SPX500 trades 2976.53 last, sitting back atop the 2959.04 level for now.
Safe Haven Flows Noted
Safe havens have been higher today. Despite a firmer USD and risk assets trading mostly positively, both gold and JPY have been higher against USD.
The backdrop of the trade war and Brexit negotiations is providing uncertainty, for now, keeping safe-haven flows intact. USDJPY trades 108.22 last with XAUUSD trading 1495.38, still below the 1500 level for now.
Crude Down on China Trade Fears
Oil has been under pressure this week as a result of the reversal in sentiment around US-China trade negotiations. The prospect of talks collapsing remains a real risk in light of the news that China wants to go back over the details of the deal before signing anything.
Later today, the market will receive the weekly API crude report, ahead of tomorrow’s key EIA report. If we see a further surplus reported this would likely exacerbate the crude slide. Crude trades 52.58 last.
Loonie Rises on Weak Oil
USDCAD has been higher today. A stronger US Dollar, as well as weakness in crude prices, has seen the loonie trading firmly back above the 1.3207 level.
Price is still down sharply from the levels seen last week above 1.33. For now, the move appears corrective suggesting that further downside could be seen in the near term.
Aussie Under Pressure
AUDUSD has been lower today as the US treasury secretary warns China that new tariffs will be applied to $156 billion of Chinese goods if a deal is not signed by December 15th.
For now, the market remains hopeful that a deal will be signed soon. However, AUD is under pressure over the two-way risks. AUDUSD trades .6761 last. The RBA is currently expected to ease one more time this year by December though this could be brought forward if trade-deal uncertainty persists.