Considering the developing risks, markets are handling the news flow relatively well. Asia equity markets were mixed and European stocks are higher. UK-EU negotiation has devolved into a deadlock (agreements seem unlikely by 31st Oct). Negative signals from Washington on US-China trade negotiations, which follows US escalation by suspecting China officials visa access. Expectations are low as US-China top trade negotiations are planning to meet today. There was a minor glimpse of hope as Chinese officials stated Beijing cold accept a limited trade deal as long as no additional further tariffs are imposed. Finally, news that Turkey launched an offensive in northern Syria, hitting the US back Syrian militia. We remain bearish on GBPJPY Brexit uncertainty is very unlikely to reduce near term. GBPUSD bearish trend needs to clear 1.2197 extend downtrend to back to the 1.1959 lows.

US treasury yields continue to gains as the demand for risk increased. The long end of the US curve hit an October high at 2.09%. Crude rose briefly after Turkish forces launched an offensive in Syria, however, prices fell as U.S. data indicated that crude stockpiles increased for the fourth straight week. Yesterday’s FOMC minutes indicated that most FOMC members are more concerned about the downside risk to growth than the upside risk of inflation. The minutes highlight clear diversion within the committee. The trade tensions and weaker global growth are the key fears. Interestingly, the members seem unconcerned over the effect that tariffs might have on inflation. Overall, further weakness in activity data will trigger two-25bp cut (Oct and Dec) this year. That is as long as inflation remains subdued. Today markets will be watching UK Industrial production and construction data and US CPI. EURUSD remains stuck in a sideways range, between 1.0940 support and resistance at 1.1000.


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