The US dollar made broad inroads against the G10 currency board last weekend, suffering losses to the kiwi and Canadian dollar only. The New Zealand dollar has almost reversed all of last week’s gains this morning, however, after September’s business confidence index fell to an 11-year low. Over the weekend, a US treasury official announced that the US has no plans to stop Chinese companies listing on American exchanges at this time, following reports on Friday that the US would attempt to limit capital flows into China ahead of trade talks on October 7th. Asian equities broadly followed sentiment from US index’s on Friday to trade in the red. Today is the last day Chinese investors will be able to react to US-Sino relations as markets close for five days to mark the 70th anniversary of the Communist Party. The dollar is trading marginally lower this morning as impeachment proceedings progress and little data is scheduled.


Sterling fell 1.5% last week as optimism following the Supreme Court hearing was slashed. This week, the Tory party conference will be in focus for markets especially with a snap election still on the table. At the conference over the weekend, PM Johnson announced a £13bn package to build 40 new hospital projects across England by 2030. Health secretary Matt Hancock confirmed that 6 hospital trusts will see their building projects completed by 2025 as only £2.7bn of the headline proposal has been allocated thus far. Today, Chancellor of the Exchequer Sajid Javid will announce a £25bn “infrastructure revolution” which will include nationwide 5G broadband in his speech at 14:55 BST. The spending plans are pivotal for the UK’s economic progression should an election be granted by the opposition parties in the House. While the conference continues in Manchester, markets are likely to receive a break from Brexit related headlines coming from Westminster. Such headlines have repeatedly dictated the pound’s price over the last few quarters. On the data calendar, the final reading of Q2 GDP is released at 09:30. Growth is expected to remain at 1.2%. The splurge of PMI reports starts tomorrow with the manufacturing reading for September, with the construction and services reports released over the following two days respectively.


Draft budgets for 2020 remain in focus for the single currency as the economy continues to show signs of slowing. Italy’s Finance Minister Roberto Gualtieri told RAI television that Italy will use “all the flexibility available” to slights expand its budget. Previously, comments from Italy over their fiscal expenditures prompted weakness in the single currency as investors feared substantial backlash from the European Commission over breaching fiscal rules. The need for fiscal stimulus was made clear by ECB President Mario Draghi at the last policy meeting. Draghi doubled down on his views over the weekend, telling the FT “Given the inherent weakness of national states in a globalised world, what matters is to make the union stronger. We need a common euro-zone budget.” This morning the euro has sat relatively flat despite slips in inflation and growth data from Spain – Q2s GDP was revised down from 2.3% to 2.1%. Later today, inflation readings are released for Germany and Italy, with readings likely to show inflation running below the ECB’s 2.0% target in September. German unemployment data is also released at 08:55 BST today. The median forecast supplied to Bloomberg suggests the unemployment rate will remain at 5.0% despite growing concerns of an economic slowdown. Over the weekend market speculators trimmed their net short position as reported by the CFTC. This went against the broad theme leveraged funds purchasing USD across the G10 currencies.


The loonie was one of two currencies in the G10 to make inroads against the greenback over the course of the last week. Friday’s 0.23% rally caused this statistic after a muted trading week for USDCAD. The rally came after the release of July’s budget data showed Canada ran a budget deficit following an increase in government spending. This is as expected for an economy in the run-up to an election and confirmed that the Canadian economy will likely remain resilient to the global economic slowdown. Over the weekend, leveraged funds switched to become net CAD short.



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