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U.S. session traders appear to be in holiday mode already as dollar pairs cruised slowly while the Loonie gave up some ground as the fifth round of NAFTA talks are about to close.

  • Chinese CB leading index posted another 1.3% gain in Oct
  • U.S. CB leading index up 1.2% vs. 0.6% forecast for Oct
  • NAFTA talks in deadlock over U.S. auto demands
  • Nebraska regulators approve Keystone XL Pipeline route
  • U.S. President Trump: Treasury to announce more North Korea sanctions

Major Events/Reports

Lack of progress in NAFTA talks

It looks like Uncle Sam still can’t see eye to eye with Canada and Mexico as the fifth round of NAFTA negotiations are about to end without much to show for.

The main point of contention is the U.S. demand for tougher automotive content rules. Trump wants to require half of the parts of all North American-built vehicles to be sourced from the homeland and that the regional vehicle content requirement be increased from 62.5% to 85% – something that Canada and Mexico deem unworkable.

The next round of talks is slated to take place by the end of January next year, but Mexico is under pressure to get something done before the campaign period for the country’s presidential elections in March.

Besides, the threat of Trump throwing a tantrum deciding to completely pull out of the NAFTA talks is still very real, possibly causing even worse economic damage.

North Korean jitters still in play?

Although a number of other geopolitical risks have popped up in the past few weeks, fears of North Korean tensions escalating are still waiting in the wings.

The Donald’s plans to announce further sanctions on the hermit nation this week might not cool things down at all, following his decision to put North Korea back on a list of state sponsors of terrorism. He said:

“In addition to threatening the world by nuclear devastation, North Korea has repeatedly supported acts of international terrorism, including assassinations on foreign soil. This designation will impose further sanctions and penalties on North Korea and related persons and supports our maximum pressure campaign to isolate the murderous regime.”

North Korean leader Kim Jong-Un is not expected to take this lightly, and South Korea has already cautioned that their neighbor up north is set to conduct additional missile tests this year to improve its long-range missile technology.

U.S. intelligence officials once again warned that this move by Trump could backfire, especially since the basis for including North Korea in the list of state-sponsored terrorism along with the likes of Iran, Sudan, and Syria has shaky basis.

Risk appetite remains supported

Even with prevailing uncertainties, traders showed enough appetite for risk to keep U.S. equities and most commodities in the green.

  • Dow 30 index is up 72.09 points to 23,430.33 (+0.31%)
  • S&P 500 index is up 3.29 points to 2,582.14 (+0.13%)
  • Nasdaq is up 7.92 points to 6,790.71 (+0.12%)

Stock index futures point to a mixed day ahead:

  • Nikkei 225 futures are up 45 points (+0.20%)
  • Australia’s ASX futures are down 26.5 points (-0.44%)

Major Market Mover(s):

CAD

The Loonie was one of the weaker performers of the session, bogged down by the back-and-forth in NAFTA negotiations even after drawing a bit of support on Nebraska’s green light for the Keystone XL Pipeline route.

USD/CAD edged up from 1.2761 to 1.2813, CAD/JPY sank to 87.87, GBP/CAD advanced from 1.6895 to 1.6969, and CAD/CHF is holding on to .7750.

USD

Despite lower liquidity, the Greenback managed to chalk up some gains on the heels of higher bond yields.

USD/JPY recovered to 112.59, USD/CHF is back up to .9940, EUR/USD edged down from 1.1809 to 1.1730, and GBP/USD slid to a low of 1.3223.

Watch Out For:

  • 12:30 am GMT: RBA monetary policy meeting minutes
  • 2:00 am GMT: New Zealand credit card spending y/y (4.9% previous)
  • 3:50 am GMT: RBA Assistant Gov Bullock’s testimony
  • 4:30 am GMT: Japanese all industries activity index (-0.4% expected, +0.1% previous)