Risk sentiment tripped in Asia with equities slipping a touch after a more upbeat US close as participants mulled the implications of another possible vaccine trial setback and China's ban on Australian coal in its power station, expanding yet another trade war fissure at a most inopportune time in the recovery cycle
The sell-off wasn't too bad as we have been down this road before, as safety trumps rushing the vaccine out. Overall, with numerous vaccines in the pipeline, this setback might not be viewed too negatively unless unexplained illness becomes more expensive in other trials. A point, in fact, oil prices barely blinked. But it makes for poor eye candy as attention will now turn to the start of the Q3 earnings season with today's releases including, Johnson & Johnson,
AUDUSD is proving ultra-sensitive to CNH downside. In addition to reacting negatively to the recent rally in USDCNH, AUD is underperforming its G10 peers as political fractures are growing between Australia and China after reports that some power stations in China have been told to stop using Australian coal immediately.
GBPUSD is well supported, reflecting a combination of USD weakness and growing optimism that UK-EU Brexit negotiations will not hit the London Wall ahead of Thursday's leaders' summit. If sufficient progress is made on talks this week to extend negotiations, GBP markets' focus could turn to economic risks. These risks are firmly tilted to the downside in the context of wide-sweeping social mobility measures in swathes of Northern England in a three-tier covid-19 alert system. Of course, the discussions around negative rates.
Elevated oil inventories will continue to be a dead weight on prices over the short-term dissuading traders from building positions ahead of the inventory reports. ( like today) But oil still rallies on any stimulus news suggesting that a Biden election could prove a short-term bullish catalyst for oil as will be the expected US dollar depreciation
Markets cheered the tech rally as gold snapped its winning streak. Still, whether it's a hedge against the ultra-loose monetary policy or a safe-haven asset in a time of uncertainty, look to accumulate on dips towards 1900. F Democrats polling strong into the US election should be optimistic for gold as a bigger fiscal stimulus package could become more likely. XAUUSD support at 1900 and resistance in 1960.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower