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Intermarket:
- SP Futures 3297 (-0.57%)
- EUSTXX 3254 (-0.80%)
- Crude Oil 40.95 (-0.37%)
- US 10YR 0.69
- EurUsd 1.1894 (+0.26%)
- UsdJpy 104.31 (-0.23%)
- DAX 13036 (-0.81%)
European equity futures indicate a softer open after risk sentiment was pulled down by the “FinCen” leak, showing 5 major banks accepted illicit funds from questionable origins. This comes on top of potentially heightened tensions between the US and China over TikTok and WeChat.
The US Dollar was slightly softer in dull Asia trade, with oil and gold a bit softer also. To note, President Trump “gave his blessing” to Oracle’s bid for TikTok’s US operations. In other news, GBP should remain under pressure on increasing speculation of a second UK lockdown amid surging coronavirus infections. Meanwhile the FT reported the ECB will review its Pandemic Emergency Purchase Programme. Without further details it is difficult to understand whether this development is positive or negative.
Watch NZDUSD: long positions seem to be increasing ahead of the RBNZ this week. The market may be underestimating the intention of RBNZ to ease and lower the Kiwi. To note, REINZ shadow board see QE as more appropriate over the coming year compared to negative interest rates.
Looking ahead this week: we get the congressional testimony by Fed Chair Powell and Treasury Secretary Mnuchin on CARES Act. Several Fed officials scheduled to speak following last week’s FOMC meeting. Global flash PMIs headline data releases. Markets also eyeing comments from White House officials and lawmakers on progress towards coronavirus relief package.
Matters that Matter:
- HSBC and Standard Chartered shares tumble after “FinCen” leak shows 5 large int’l banks moved suspicious funds
- Oracle: To take a 12.5% stake in TikTok Global with Trumps’ blessing.
- PM Ardern: Confirms Auckland gathering limits to ease on Sept 23; NZ outside Auckland will move to Level 1 tonight
- NZIER: NZ shadow board still favours QE over negative rate
- ECB to review flagship bond-buying tool in fighting Covid crisis
Majors Weekly View:
USDJPY
- With sentiment extended at the daily level, pullbacks are likely but should be temporary, and the outlook for this week remains bearish.
- “FinCen” leak weighs on bank stocks and sentiment
- Breach of 104.00/15 opens the door to 103.60s.
EURUSD
• With sentiment trading sideways for 2 weeks in a row, trend signals are weak. Until 1.1900 is consolidated to the topside, signals remain slightly bearish on balance this week.
• USD largely offered in overnight trade.
• ECB’s PEPP review potential driver but more clarity needed.
AUDUSD
• Trend signals remain weak as prices have been largely trading around the .7300 handle for the past week. As such, the outlook is neutral between .7250 and .7350.
•Prices supported in Asia on lower Covid-19 cases and weaker USD, hopes that Victoria will curb lockdown measures sooner rather than later.
• Iron ore and Copper also supportive.
GBPUSD
• Last week’s retracement found sellers ahead of the prior week Marabuzo line, maintaining the downwards bias intact. As such, signals continue to point lower this week.
• UK lockdowns to return?
• GBP still biased lower.
FX Relative ATR Grid
Comment: Directional volatility remains elevated in the Pound, the Yes and Kiwi. That is where continuation trades are more probable. Volatility expansions can be expected on most other Cad and Aud pairs after decisive range contractions last week.