Investors continue to focus on the US-China trade conflict, as well as the general state of the US economy. Yesterday, the US administration has extended the validity of permits for the cooperation of American companies with Huawei for another 90 days. However, at the same time, 46 branches of the Chinese corporation were blacklisted, which would not allow them to conduct business in the United States. Huawei has already called this decision “unjust” and “politically motivated.” According to The Washington Post, the White House is actively discussing the possibility of a temporary reduction in the payroll tax, which will be another measure of stimulating the economy along with a possible reduction in the Fed rate.
Today, the euro is strengthening against the pound but is weakening against the US dollar and the yen.
In the absence of important macroeconomic releases, EUR movement is of technical nature. Yesterday, British Prime Minister Boris Johnson sent a letter to the head of the European Council, Donald Tusk, in which he indicated that the deal could be approved by Parliament if the backstop provision for the Irish border was removed from it. In response, European Commission officials said that Johnson did not provide any alternative solutions to prevent the introduction of a rigid Irish border, and there is no guarantee that such decisions will be worked out in the future. Tusk himself via Twitter noted that the backstop clause is important insurance to prevent Ireland from splitting up. Thus, Johnson’s proposals were met negatively, and the risk of Britain leaving the EU without a deal increased.
GBP is weakening today against its main competitors – EUR, USD, and JPY.
The pound is pressured by the refusal of Brussels officials to discuss the abolition of the backstop clause for the Irish border, which Prime Minister Boris Johnson asked in a letter. He hoped that the abolition of this controversial clause would help pass the text of the deal through parliament. Such a response from the EU could make useless Johnson’s upcoming visits to Berlin and Paris, scheduled for the end of the week. In addition, the pound is also pressured by the index of UK manufacturing orders from the Confederation of British Industrialists (CBI). In August, the index turned negative for the fifth consecutive month and amounted to −13 points.
The Japanese yen is strengthening today against its main competitors – the euro, the pound, and the US dollar.
In the absence of important macroeconomic releases, JPY movement is of technical nature. It is worth noting that a trilateral meeting of foreign ministers from South Korea (Kang Kyung-wha), Japan (Taro Kono), and China (Wang Yi) will begin in Beijing today to resolve the trade dispute that arose after Japan restricted its export of a number of important materials for Korean industry. On the eve of the meeting, the parties softened the rhetoric but did not show any signs of compromise.
The Australian dollar is strengthening today to the euro, the pound, and the US dollar and has ambiguous dynamics with the yen.
Investors are focused on the publication of minutes of the last meeting of the RBA. They say that the regulator has considered “unconventional” monetary policy measures. They can be understood as a policy of quantitative easing, in particular, the purchase of government securities; the provision of long-term financing to banks to support the creation of loans; the purchase of private sector assets; and foreign exchange interventions. It was also noted that the US-China trade dispute continues to be a major cause of uncertainty. In addition, bank officials noted that Australia’s housing market is likely to have bottomed out and its condition will begin to improve. Unemployment in the near future will continue to decline and reach 4.5%. The protocol also indicated that it is reasonable to expect a long period of low interest rates, the labor market will begin to steadily strive for full employment, and inflation will rise to the target level.
Oil quotes had ambiguous dynamics today: morning growth was replaced by a correction and loss of all positions won.
Today, the market is in relative calm; investors are waiting for the weekly API report on the US crude oil reserves. The last time they declined by 2,190 million barrels. The continuation of this trend may support prices.