Today, prices are correcting down. Quotes are pressured by adding another 28 companies and state structures of the PRC to the American “blacklist” of enterprises that are prohibited from cooperating with US companies. This move by the US administration casts doubt on the results of a new round of trade negotiations to be held this week. Riots in Iraq and Ecuador, which may lead to disruption of oil production and transportation, are somewhat holding back the decline. In the evening, investors are waiting for the weekly API report on the US crude oil reserves. The last time they declined by 5.920 million barrels. The continuation of this trend will support prices.
Turning to Currencies
The US currency is weakening today against the euro and the yen but is strengthening against the pound.
Investors continue to monitor the situation around trade relations between the United States and China. A new round of negotiations should begin on Thursday, but since Monday the situation is becoming increasingly alarming. At first, Bloomberg disseminated evidence that the Chinese delegation would not discuss reducing government subsidies to the industry, which Washington insists. The US Department of Commerce then added 28 Chinese government agencies and companies (including Zhejiang Dahua Technology, IFLYTEK Co, and Xiamen Meiya Pico Information Co) to the blacklist of organizations that are barred from working with US companies because of reprisals against Chinese Muslim minorities. Today, China’s television suspended broadcasts of NBA matches, and major e-commerce stores stopped selling American basketball teams’ merch in response to recent protests in Hong Kong. These events raise concerns among investors about the success of the negotiations.
Today, the euro is strengthening to the US dollar and the pound but weakens to the yen.
The European currency is supported by statistics on industrial output in Germany. Instead of the expected decline of 0.2% in August, the volume increased by 0.3%. However, according to experts, this recovery is temporary and the deceleration will continue in the future, as evidenced by a decrease in industrial orders in August by 0.6%. The negotiations on Brexit remain the focus of investors’ attention. Today, the British media reported on Germany and Ireland opposing the new plan of Boris Johnson, which makes the conclusion of an agreement unlikely.
The British pound is weakening today against its main competitors – the euro, the yen, and the US dollar.
Pressure on the pound was exerted by the fact that negotiations on a new deal with the EU were on the verge of failure. According to BBC and Sky News, Prime Minister Boris Johnson held tough negotiations with German Chancellor Angela Merkel, during which she insisted that Northern Ireland should remain in the EU customs union, otherwise a deal is unlikely. However, negotiations continue and there’s still the chance to negotiate. Data on retail sales from BRC provides additional pressure on the pound. In September, the index fell for the second time in a row, by another 1.7%.
The Japanese yen is strengthening today against its main competitors – the euro, the pound, and the US dollar.
Against the backdrop of yet another complication in the US-China relations, investors are buying the yen as a “safe haven asset”. The August data on expenditures of Japanese households published today did not meet market expectations. MoM, the index grew by 2.4% instead of the expected 2.8%, and YoY by 1.0% instead of the expected 1.2%.
The Australian currency today is weakening against the yen, strengthening against the US dollar and pound and has ambiguous dynamics against the euro.
In the absence of significant releases, the movement of AUD is technical. It should only be noted that investors are wary of yet another aggravation of US-Chinese trade relations ahead of the start of the next round of talks on Thursday. Their failure can put serious pressure on the position of all commodity currencies, including the Australian dollar.
Robert Thomas has over 14 years experience in the investments on the institutional side of markets and has an “insider” view on the markets. In addition, he is an futures day trader that focuses on analyzing fundamentals, specifically earnings reports and technical levels. He has a Masters Degree in Business and Economics.