Risk Appetite Recedes Midweek

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Dollar Higher on Trade Deal Concerns

The US dollar has been a little firmer over the European morning on Wednesday as equities markets have seen a mild pullback. Uncertainty around Brexit negotiations as well as the pending signing of the US/China trade agreement has seen traders pairing risk into the middle of the week. USD index trades 98.09 last as safe-haven flows have seen price recovering off overnight lows. Later today we receive US retail sales data for September. These are expected to have ticked up slightly on the core reading and down slightly on the headline figure.

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EUR Straddling 1.1025

EURUSD has been softer against USD today in light of the recovery in the greenback. The fundamental backdrop remains the same for the Eurozone as data weakness keeps sentiment skewed to the downside. Ongoing Brexit negotiations are also creating uncertainty with the potential for a no-deal Brexit still intact. This would hurt the Eurozone economy further. EURUSD trades 1.1027 last, sitting just atop the 1.1025 level for now.

GBP Down Ahead of Deal Deadline

GBPUSD has been lower today. The UK now has until midnight to submit a final version of its proposed Brexit deal to the EU. The EU is due to decide on the deal at tomorrow’s October summit. Despite positive commentary over recent days, traders remain wary of the risk that no deal will be done. This is keeping GBP weighed down today. GBPUSD trades 1.2717 last having tested the 1.2768 level yesterday.

Risk-Off In Face Of Uncertainty

Risk assets have been lower into the middle of the week as traders weigh up the current risk environment. Brexit negotiations and the outstanding deal between the US and China are creating uncertainty which has seen traders moving out of riskier assets for the time being. SPX500 trades 2987.83 last, with price having reversed after testing the bull channel top.

Gold & JPY Rally

Safe havens have had a better start to the day today taking advantage of the weakness in equities markets. Both JPY and gold have been higher against the US dollar as traders look to protect capital during the current uncertainty. XAUUSD trades 1483.48 last, still down well below the 1522.75 level. USDJPY trades 108.64 last with price pulling back from fresh three month highs printed yesterday.

Crude Down – EIA Delayed

Oil prices have been sold across the week as traders continue to show caution ahead of the US and China signing off on the verbal deal agreed last week. While Trump remains confident that the deal will be signed, traders are cautious given China’s history for pulling out of deals. The EIA inventories report is released a day late this week. This means that traders will have to wait until tomorrow to get the latest supply/demand data for the US. Crude trades 53.02 last.

CAD Higher

USDCAD has been a little lower today despite the strength in USD and weakness in crude prices. The pair continues to fluctuate around the 1.3207 level that acted as support for the sell-off last week. However, price action is looking weak again now and a further drop below the level seems likely.

AUD Weighed Down

AUDUSD has been lower today also as the risk-off mood has hit the Aussie.  Persistent fears over the signing of the US/China trade deal is keeping AUD pressure in the middle of the week though upside in gold has offset some of the weakness. AUDUSD trades .6734 last.

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