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Market participants kept their hopes up for positive trade developments, lifting commodity currencies and pushing the yen further down.

Commodities also extended their gains from the earlier session while the S&P 500 index surged to record highs. Even the pound and euro got a lift as Brexit talks seem to be going by without a hitch so far.

  • Canada’s wholesale sales down 0.8% vs. projected 0.7% gain
  • New Zealand GDT auction yielded 3.8% slide in dairy prices
  • New Zealand Q2 headline retail sales up 1.1% vs. projected 0.4% gain
  • Core retail sales up 1.4% vs. 0.8% forecast for New Zealand
  • U.S. Commerce Secretary Ross postponed release of auto tariffs report
  • EU’s Barnier: Will continue Brexit negotiations from here on
  • Barnier: Prepared for “no deal” Brexit
  • U.K. Brexit Secretary Raab: Deal can be reached in Oct

Major Events/Reports:

U.S. to delay auto tariffs?

Commerce Secretary Wilbur Ross might need an extension on his deadline to submit the auto tariffs report – something that the Trump administration needs to review before actually imposing higher duties.

As it turned out, Ross could use more time to review the material submitted by U.S. and foreign automakers and that he couldn’t possibly finish reading it all in time to come up with a report by the end of this month as promised. He also pointed to Trump’s deal with EU head Juncker to refrain from imposing further tariffs.

Ross also mentioned that the delay is also due to ongoing negotiations with representatives from the European Commission, Mexico and Canada. Some automakers see this as a sign that the U.S. could rethink its position on industry tariffs, which would be disruptive to several supply chains and operations.

As it is, Ross’ timetable for completing the report is still TBD as his department is also looking into whether the national security law, which was used to justify steel tariffs, could also be applied for autos.

So far so good in Brexit talks

Pound traders were understandably nervous as another round of Brexit talks resumed between U.K. Brexit Secretary Dominic Raab and E.U. Chief Negotiator Michel Barnier.

In their press conference, Barnier confirmed that negotiations have reached the final stage but that they will continue discussions from now on. He also assured that they are not aiming for a “no deal” Brexit but that they are also prepared for it.

Raab acknowledged that there are still difficult issues to overcome (cough, Ireland, cough) and that these should be resolved on a political level. He did express confidence that they could reach a deal by October, citing that a “no deal” situation could be “the most costly form of Brexit.”

Raab added that “hair-raising scare stories” on a disorderly Brexit are far from truth and that he’d address these in more detail when the U.K. government releases its notices for various sectors later this week. He also mentioned that he and Barnier have another meeting scheduled in Brussels next week.

Risk-taking in play

Another factor keeping traders in positive spirits so far this week is the upcoming round of trade talks between the U.S. and China. This, combined with hopes that auto tariffs could be avoided and the lack of Brexit drama, kept market participants hungry for risk.

  • Dow 30 index is up 63.60 points to 25,822.29 (+0.25%)
  • S&P 500 index is up 5.91 points to an all-time high of 2,862.96 (+0.21%)
  • Nasdaq is up 38.17 points to 7,859.17 (+0.49%)

    Risk appetite also lifted gold and crude oil while U.S. bond yields edged higher.

Major Market Mover(s):

GBP

Sterling drew support from a mostly optimistic tone shared by Barnier and Raab during their brief presser after their talks.

GBP/USD resumed its climb to 1.2925 after consolidating near 1.2800; GBP/JPY advanced from 141.50 to a high of 142.44; GBP/AUD is up to 1.7540; and EUR/GBP dipped to a low of .8954 but popped back up to .8990.

JPY

The yen was still in the weakest spot as trade-related developments continued propping up risk appetite. Higher U.S. bond yields also weighed on the lower-yielding Japanese currency.

EUR/JPY climbed from 127.07 to a high of 128.05; AUD/JPY rallied from 81.14 to a high of 81.48; NZD/JPY is up to 73.85; and CHF/JPY is up to a high of 111.98.

AUD & NZD

This higher-yielding tandem managed to score gains for themselves, except against the euro and pound, even as data from New Zealand turned out mixed.

AUD/USD advanced to a high of .7382; NZD/USD is up to the .6700 area; AUD/CAD is up to a high of .9614; NZD/CAD is up to .8761; and AUD/NZD is down to a low of 1.0948.

Watch Out For:

  • 12:30 am GMT: Australia’s MI leading index (previous reading was flat)
  • 1:30 am GMT: Australian quarterly construction work done (0.7% gain expected)
  • 3:10 am GMT: RBA Assistant Gov Debelle’s testimony
  • 4:30 am GMT: Japanese all industries activity index (0.7% dip eyed)