The US dollar firmed yesterday as month-end flows boosted the greenback. The Bloomberg dollar index, which tracks broad dollar moves, reported the best quarterly gain since June 2018. The dollar was potentially buoyed by higher repo rates at the start of Monday’s session, but injections by the New York Fed soon brought the lending measure down. Meanwhile, White House trade advisor, Peter Navarro, noted yesterday that reports of the US considering plans to stop Chinese firms from listing shares in the US were inaccurate. The trade news didn’t stop there as China gave new waivers for tariff-free soybean purchases. The news comes ahead of trade talks resuming next week. The move lower in EURUSD also helped the greenback as the pair accounts for much of the dollar index weighting due to the large volume of transactions in that market. Today, the ISM manufacturing index is released at 15:00 BS, just after the final reading of the IHS Markit measure for September. The ISM reading recorded a contraction in the US manufacturing sector in August for the first time since 2016. For that reason, it will likely draw a lot of attention again today.


Sterling sold off marginally yesterday with little news in the way of Brexit. Chancellor Javid promised to loosen the government’s purse strings over the next 5-year period as the Conservative party conference gears up for a general election on the horizon. Boris Johnson will embark on a round of broadcast interviews this morning prior to his speech at the end of the conference in Manchester tomorrow. After which, many are expecting PM Johnson to submit the government’s formal proposals for a Brexit deal in a legal text. Johnson is expected to label the backstop mechanism ‘dead’ in the text and propose the all-Ireland solution instead. This, in matter of fact, will only exist largely for food and agricultural products. Other traded goods will be required to pass through clearing centres a few miles away from the border where they will be tracked heading North or South of the border thereafter. The release of the latest Brexit proposal and the ensuing comments back from the EU are likely to drive sterling’s price action this week with only 30 days left until the deadline at the end of the month.


The euro broke a key level of support yesterday to trade at levels not seen since May 2017 after poor inflation data was released for the block along with worrying signs in Germany’s unemployment data. The CPI Harmonised index in Spain fell to 0.2% YoY, 0.3% YoY in Italy and 0.9% YoY in Germany yesterday ahead of today’s release of the Eurozone wide CPI measure. Falling inflationary pressures confirmed the predicament the ECB is in. Inflation dipped below 1% in Germany for the first time since 2016. On top of that, despite unemployment rates falling to 7.4% in August, the lowest in over 11 years following an unprecedented drop in Italy’s unemployment rate to 9.5%, the number of vacancies shrank. This could be a sign of caution from businesses as the German economy slows. Today, along with the Eurozone-wide CPI reading at 10:00 BST, we have manufacturing PMIs released just before 09:00. Eyes will be fixated on Germany’s release at 08:55 after the flash reading for September suggested the German manufacturing sector contracted at the fastest rate in a decade.


The loonie was the only G10 currency to sit higher against the US dollar yesterday as growth fears re-entered the market. USDCAD is currently pivoting around the 50-day and the 100-day moving average, with the latter set to cross the former in the coming days. This is traditionally a bearish signal on the cross as it highlights the underlying momentum is lower. Today, GDP data is released for Canada at 13:30. The economy is expected to have grown at a marginally slower rate of 1.4% YoY in July.



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