China Signals It May Be Open to a Partial Trade Deal with the US on Agri-products

**Overview:**

• Brexit continues to give currency investors the jitters.

• China states it will be would be open to buying US agricultural products, giving new hope of more positive trends to come in US-China trade talks. Yet President Trump will have to back off tariff threats first.

• The euro, yen and Canadian dollar are only making modest gains as the USD succumbs slightly to pressure.

**Highlight:**

Play. Rewind. Replay. Lather, Rinse, Repeat. Financial markets continue to sway to the same tune. Yet the DJ may have just picked a great song for currency investors to dance to, as China has signalled they would be open to a partial trade deal, even though some Chinese tech companies have been blacklisted. The Brexit impasse and fear of a global economic slowdown still need to be addressed, however.  

US DOLLAR

The US dollar is trading broadly weaker vis-à-vis its major peers this morning. The US has announced visa restraints just before a high-level meeting, adding pressure to raw nerves. Yet China today signalled an interest in a partial trade deal on US agricultural products even though the US has blacklisted some Chinese tech firms.  Investors remain nervous –are still deciphering the no-QE type announcement from Fed Chair Powell and waiting for the release of FOMC minutes from last month’s meeting. Powell said he is confident in the moves the Fed has been making.

BRITISH POUND

In the UK, the Brexit stalemate continues to inject bouts of volatility into the Sterling with the currency sliding to a four-week low yesterday. The pound remains vulnerable to further downside movement if the EU and UK fail to agree on a makeshift plan before the end of the month. So far, both parties have been trading blame and talks on the new proposals seemed to have collapsed. On this trajectory, we are hurtling towards a no-deal exit, come October 31st. As we mentioned last time, Sterling trading will be choppy with wide swings expected between 1.21 and 1.24 range.

EURO

The Euro is trading with a slightly firmer tone this morning amidst general USD weakness. The EUR/USD, however, remains within recent consolidation range after bouncing from a 2 ½ year low. There was no major data release during the European session. Hence, we expect the Fed minutes to inject cautious trading opportunities later today.

CANADIAN DOLLAR

USD CAD continues to move without defined direction after breaching the 200-day moving average last week. There is an absence of momentum to fetch higher highs as investors prefer to adopt a Wait and See policy. The US Fed is releasing meeting minutes later today (2 PM ET). The market will also keep an eye on Powell’s speech at a Fed Listens event. We expect the Canadian dollar to be driven by broader market sentiment and further developments in trade talks between the US and China.

AUSTRALIAN DOLLAR

AUD USD is down slightly after the Westpac Consumer Confidence survey numbers were less than positive. Confidence slumped from -1.7 in September to -5.5 for October. The pair now sits at 0.673031.

JAPANESE YEN

The greenback is in recovery mode but is still within yesterday’s trading range. The market is hoping high-level talks between Beijing and Washington will, in fact result in a partial trade agreement. USD/JPY is up 0.4% as we enter the NA session. We don’t expect the JOLTS Job openings report to sway market sentiment much. Instead, investors will be focussed on to Fed Chair Powell’s speech and the central bank monetary policy minutes.

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