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Risk appetite extended its stay throughout the U.S. session, lifting a couple of stock indices to new record highs and pulling safe-havens back.

The higher-yielding Kiwi found itself in the top spot, followed by the euro and pound, while the dollar and yen lagged behind.

  • Canadian ADP non-farm employment change at 13.6K, 35.5K previous
  • U.S. Philly Fed manufacturing index up from 11.9 to 22.9 vs. 17.5 expected
  • U.S. initial jobless claims down from 204K to 201K vs. 210K forecast
  • Euro zone consumer confidence index dipped from -2 to -3
  • U.S. existing home sales unchanged at 5.36M vs. 5.38M conensus
  • New Zealand visitor arrivals jumped 2.8% after earlier 0.7% uptick
  • ECB’s Praet: Economy expanding above potential
  • Praet: Sustained convergence to inflation target will proceed
  • Tusk: October 18 EU Summit will be “moment of truth” for Brexit talks
  • Tusk: “Little bit more optimistic” that a Brexit deal will be struck
  • PM May: Agreed with Tusk on need for backstop and free flow of goods
  • PM May: Only workable proposal for Irish backstop is from the U.K.
  • French President Macron: “Chequers plan cannot be take it or leave it.”
  • Italy’s Di Maio to quit coalition if budget demands not met?

Major Events/Reports:

Italy’s Di Maio to quit coalition?

In the latest episode of Italy’s political drama series, 5-Star Movement’s Luigi Di Maio threatened to throw in the towel if his political party’s spending demands for 2019 are not met, declaring:

“If we do not find the resources we better go home. It is useless to chug along.”

However, Di Maio’s spokesperson later on clarified that this wasn’t a threat to pull the 5-Star Movement out of the coalition, adding that the government remains united in drafting its spending plans.

Keep in mind that the budget deadline on September 27 is fast-approaching, which means Economy Minister Tria is under a lot of pressure to set growth, deficit and debt targets for next year while meeting political party demands and EU requirements. Here’s why this is a huge deal for Italy and the euro.

More Brexit remarks in EU Summit

It looks like EU leaders are still in a deadlock when it comes to Brexit talks, with neither side refusing to let up on the Irish border backstop issue. Here are some highlights from the press conferences of European Council President Tusk and U.K. Prime Minister May during the summit:

Tusk clarified that there would be no Brexit deal without any clear and workable solution on the Irish border issue, echoing Merkel’s remarks that the single market must be protected. He also pointed out:

“Everybody shared the view that while there are positive elements in the Chequers proposal, the suggested framework for economic cooperation will not work, not least because it risks undermining the single market.”

Furthermore, Tusk doused rumors that a November special Brexit summit has been set, clarifying that the “moment of truth” for talks is on the October pow-wow.

In response to questions from reporters, Tusk noted that he is “a little bit more optimistic” when it comes to negotiations but that a “no deal” scenario is still possible.

As for Prime Minister May, she mentioned that she agrees with Tusk on the need for an Irish backstop plan and the frictionless movement of goods. However, she reiterated that the Chequers proposal is the only workable one that can deliver these, citing:

“There’s no counter proposal that delivers a good deal: that respects both the integrity of the United Kingdom and respects the vote of the British people.”

May repeated that they do want to reach an agreement but are prepared for a “no deal” scenario. She also expressed hopes that this can be a done deal by October.

Stocks up, commodities mixed

Wall Street was in a positive mood, with tech sector gains buoying the Dow and S&P to new record highs.

  • Dow 30 index is up 255.96 points to 26,661.72 (+0.97%)
  • S&P 500 index is up 24.63 points to 2,932.58 (+0.55%)
  • Nasdaq is up 78.19 points to 8,028.23 (+0.98%)

Gold was slightly higher, possibly taking advantage of dollar weakness, while crude oil dipped.

  • The precious metal is up to $1,207.62 per troy ounce (+0.31%)
  • WTI crude oil is down to $70.80 per barrel (-0.32%)

Major Market Mover(s):

JPY

The lower-yielding yen lagged further behind its forex peers as risk-taking remained supported and U.S. bond yields were higher.

USD/JPY bounced off a low of 112.04 to a high of 112.59; EUR/JPY popped up from 131.50 to 132.48; GBP/JPY advanced from 148.21 to a high of 149.28, and AUD/JPY rallied to a high of 82.03.

NZD

The Kiwi snatched the lead during the risk-on session, overtaking the Aussie and Loonie while taking advantage of dollar weakness as well.

NZD/USD is up from .6653 to a high of .6694; NZD/JPY jumped from 74.75 to a high of 75.25; EUR/NZD slipped to a low of 1.7541, and GBP/NZD is down to 1.9816.

CAD

The Loonie retreated against most of its peers, except against the yen and pound, during the session as NAFTA talks also seem to be stalling on the auto tariffs issue.

USD/CAD pulled up from 1.2884 to a high of 1.2928 but fell back to 1.2904; EUR/CAD is up from 1.5113 to a high of 1.5211; AUD/CAD is up from .9379 to .9415, and NZD/CAD is up to .8641.

Watch Out For:

  • 11:30 pm GMT: Japanese national core CPI y/y (gain from 0.8% to 0.9% expected)
  • 12:30 am GMT: Japanese flash manufacturing PMI (53.1 expected, 52.5 previous)
  • 3:00 am GMT: New Zealand credit card spending (3.2% previous)
  • 4:30 am GMT: Japanese all industries activity index (0.2% rebound from earlier 0.8% dip expected)