FX Goes On A Rollercoaster

Market Drivers October 10, 2019
Contradictory headlines create a rollercoaster ride in risk
UK data continues to miss
Nikkei 0.45% Dax +0.06%
UST 10Y 1.58%
Oil $52/bbl
Gold $1508/oz
BTCUSD $8578

Europe and Asia:
GBP UK GDP -0.1% vs. 0.0%
GBP UK MP -0.7% vs. 0.1%

North America:
USD CPI 8:30

Major pairs went on a wild rollercoaster ride in Asia session trade today driven by a series of contradictory headlines regarding US-China trade talks.

Risk-off flows dominated the start trade when China Morning Post reported that the Chinese ministerial delegation would only stay for one rather than two days of talks. That headline was denied by the White House only to be reaffirmed by Fox news. But the bad news was quickly offset by reports that the US and China would agree on a currency pact suggesting that trade talks are actually making progress.

The situation remains fluid, but for now, the markets have given the benefit of doubt to risk on flows taking yen crosses higher especially against the commdollars. AUDJPY remains the primary barometer of US-China trade sentiment and nothing reflected the topsy turvy nature of today’s trade than that pair.

Ahead of NY open its was trading at session highs of 72.70 indicating that the market was primed for some positive news from US-China talks. There is certainly a great incentive for Trump to make any kind of a deal with China that would buy him positive press for the next few weeks. With impeachment inquiry suggesting that there now may have been a second illegal act by the President of trying to obstruct justice in an ongoing DOJ investigation and the with polls now showing that 51% of Americans favor the impeachment process the political risks for the President have increased.

Therefore both the Chinese and the financial markets may be sensing that the vulnerable President is open a deal on almost any terms and are bidding risk assets ahead of the talks today.

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