Risk Rallies on Trade Deal Hopes

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Focus on FOMC

The US dollar has been a little weaker over the European session so far on Monday. Traders’ main focus this week will be the October FOMC meeting due on Wednesday. In line with the recent worsening of US economic data, the market is forecasting a further .25% rate cut from the Fed. USD Index trades 97.53 last.

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EUR Boosted By Weak USD

EURUSD has been higher at the start of the week as the single currency takes advantage of a weaker USD. If the Fed pushes ahead with a further rate cut this week that could create room for more upside in EUR in the short term. This is given that the ECB is likely to remain on hold in the near term while incoming ECB President Lagarde assesses the bank’s monetary policy approach. EURUSD trades 1.1098 last, still well below the key 1.1217 level.

EU TO Deliver Brexit Delay Date

GBPUSD has bee a little higher against USD so far today though upside has been tempered by ongoing uncertainty around Brexit. The UK is awaiting the outcome of the EU’s Brexit-delay deadline decision this week which should see Brexit postponed beyond the current October 31st Brexit date. However, until such a deadline has been given the risk of a no-deal exit is still a technical possibility. GBPUSD trades 1.2829 last, still sitting above the 1.2771 level for now.

SPX500 Near All-Time Highs

Risk assets have started the week on a positive footing. With Brexit likely to be delayed, US/China trade talks pointing towards a deal and the Fed expected to cut further this week, equities investors are being given a green light. SPX500 trades 3027.30 last, testing the 3028.38 resistance level ahead of fresh all-time highs.

Safe Havens Weaker

Safe havens have seen diminished inflows this week given the improved risk environment. Both JPY and gold have been lower against the US dollar. The BOJ is not expected to ease this week though it could be forced to if the post-FOMC reaction drives JPY higher meaningfully. USDJPY is now once again testing the 10872 level. XAUUSD trades 1504.61 last, still above the round figure for now though down off the key 1522.75 level.

Crude Still Strong

Oil prices have had a subdued session so far though are trading marginally in the green. The background remains supportive near term with US/China talks progressing well and the Fed expected to cut rates this week. Last week the EIA reported an unexpected draw in US crude stores. Traders will be closely watching this week’s report on Wednesday to see if the move continued. Crude trades 56.42 last.

CAD Keeps On Climbing

USDCAD is still battling it out around the 1.3068 level though remains just under the level for now. The recovery in oil prices along with a weaker USD is keeping the outlook bearish for the loonie. This is especially in light of the expected Fed rate cut this week which should see prices move lower yet again.

AUD Helped By Trade Hopes

AUDUSD has been higher over the day so far on Monday taking its cues from a weaker USD and improved risk sentiment. Headlines around the latest US/China trade talks on Friday helped boost AUD which will benefit strongly from a deal. AUDUSD trades .6831 last.

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