A slow start to the week - USD softness to note
Monday's are usually a steady affair in the markets, and despite the uncertainty of Brexit and the ongoing trade tensions between the US and China, the usual suspects are trading in a relatively calm manner as we await fresh news of material interest.
Looking to the weeks ahead, the G20 is where we now focus our attention with regard to a potential breakthrough in behind-the-scenes dialogue on trade. Reports that the US are ready to consider a deal with China have been downplayed, though risk sentiment is little affected as yet, though the JPY and CHF are creeping higher, though as yet, this looks largely to be a function of USD softness as yet.
USD/JPY tested support in the mid 112.00's and found support, though the recovery is anything but convincing. USD/CHF underlines this with a move back under parity, where losses could not stretch to 0.9900 along with a USD/JPY move to 112.00 - the next notable area of support.
While the EU deal proposed by PM May has been roundly criticised and rejected (last week), momentum in sparking a vote of no confidence looks to have slowed, with a little over 40 letters submitted to trigger a leadership challenge - 48 is what is required. Even in the event of a contest, Theresa May is still expected to win, so this is reflected in a steady GBP rate which is trying to gravitate back towards 1.2900.
The EUR will be dictated by the EU's dealings with Italy. It is clear that the former is critical of the budget plan, so all eyes are on how the EU responds to this in their actions, and any proposed sanctions - as have been circulated through recent rhetoric - would start to weigh on the single currency again. For now, EUR/USD is also grinding higher, yet we expect 1.1450 or so will harbour interest to fade gains if not already.
EUR/CHF is also back under 1.1400 this morning, so USD weakness is the major factor today, and this as the market starts considering some of the Fed comments on the rate path and its dependency on US data. Dec is still very much priced in (for a hike), though certain Fed members are suggesting a little restraint - possibly due to the wobbles seen in the stock market lately.