Risk appetite dipped on reports of stalemate before rallying sharply on reports of a limited deal.

US-China trade rhetoric dominated market trends. Risk appetite dipped on reports of stalemate before rallying sharply on reports of a limited deal and currency pact.

Equity markets posted net gains after recovering from a slide while bond yields moved higher in choppy trading.

There was little reaction to the Fed minutes with markets still expecting a further Fed rate cut this month. EUR/USD secured marginal gains as immediate dollar demand faded and commodity currencies rallied from 1-week lows.

Sterling was unable to make headway amid pessimism over Brexit talks.

Oil prices failed to derive support from mixed inventory data but recovered from 1-week lows as risk conditions dominated. Scandinavian currencies remained weak with marginal Norwegian krone relief after an increase in core inflation.

Fed Chair Powell stated that it was important to keep inflation around the 2% target in order to create room to adjust policy while keeping inflation expectations anchored. EUR/USD was unable to make a fresh attack on 1.1000 despite a narrowing of yield spreads and drifted towards 1.0970 at the European close with EU political concerns undermining support.

Minutes from the September Federal Reserve meeting stated that most policymakers believed a rate cut was needed given the economic outlook with risk management and inflation objectives also cited as justification. Several committee members, however, favoured maintaining current rates given that the economic outlook had not changed significantly.

Ahead of the New York open Sterling spiked higher following reports that the UK was preparing to make a major concession on the Northern Ireland backstop. These reports were denied, however, and the UK currency quickly retreated again.

The House of Commons will hold a special session on Saturday, October 19th to debate future steps. EU Commission President Juncker stated that the EU was still working on a deal while Chief Negotiator Barnier stated that the EU was not in a position to find an agreement. Markets remained pessimistic over the outlook which continued to undermine Sterling. GBP/USD was held close to 1.2200 after a 1.2290 spike while EUR/GBP pushed to near 0.9000.

The September RICS housing index recovered to -2 from -4, but activity declined. UK industrial production and GDP data will be released later, although political developments are liable to dominate with Prime Minister Johnson due to meet Irish Premier Varadkar today. Sterling consolidated little changed in early Europe with global risk conditions also significant.

Economic Calendar

Expected Previous
07:00 German Trade Balance(AUG) 19.4B 20.5B
07:45 Industrial Output MM(AUG) 0.20% 0.30%
09:00 Industrial Output MM SA(AUG) - -0.70%
09:00 Industrial Output YY WDA(AUG) 0.30% -0.70%
09:30 GBP Industrial Production (M/M)(AUG) -0.10% 0.10%
09:30 GBP Industrial Production (Y/Y)(AUG) -1.10% -0.90%
09:30 GBP Manufacturing Production (M/M)(AUG) -0.10% 0.30%
09:30 GBP Trade Balance(AUG) -9.60B -9.14B
09:30 GBP Trade Balance Non EU(AUG) - -1.93B
09:30 United Kingdom GDP (Y/Y) - 1.30%
09:30 United Kingdom GDP (Q/Q) - 0.00%
11:00 The Eurogroup Meeting - -
13:30 USD CPI (M/M)(SEP) - 0.10%
13:30 USD CPI (Y/Y)(SEP) 1.80% 1.70%
13:30 USD CPI Ex Food & Energy (M/M)(SEP) - 0.30%
13:30 USD CPI Ex Food & Energy (Y/Y)(SEP) 2.30% 2.40%
13:30 CAD New Housing Price Index (M/M)(AUG) - -0.1
13:30 USD Initial Jobless Claims - 219K
13:30 USD Continuing Jobless Claims 1.653K 1.651K
17:15 FOMC Member Kashkari Speaks - -
22:30 NZD Business NZ PMI(SEP) - 48.4
22:30 FOMC Member Mester Speaks - -
22:45 NZD Electronic Card Retail Sales (M/M)(SEP 01) - 1.10%
22:45 NZD Electronic Card Retail Sales (Y/Y)(SEP 01) - 2.80%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.