Japanese and most US markets (excluding exchanges) are closed today, respectively for Health-Sports Day and Columbus Day. Traded volumes were low today in absence of especially US investors. Add a nearly empty eco calendar – apart from outdated, near consensus, August industrial production data for the euro area – and the result is slow start to the fresh trading week. German Bunds recovered some ground from after the heavy losses registered at the end of last week. German yield changes vary between +1.2 bps (2-yr) and -3.7 bps (bps), flattening the curve. Extremely bullish risk sentiment surrounding Washington trade talks and the final effort to save Brexit talks hit a snag. European equity indices lose between 0.5% and 1%. EUR/USD traded volatile in the low 1.10 area with the dollar gaining on points. The currency pair narrowly holds above last week’s broken resistance levels. The US and China reportedly agreed on a limited trade pact, but this tentative truce rests on verbal commitments. Chinese officials indicated that more discussions are necessary before this partial accord can be put in writing. Geopolitics will probably dominate the remainder of this week’s trading as well given the October 17-18 EU Summit which focuses on Brexit. Other potential market drivers are the start of Q3 earning seasons, US retail sales and regional business surveys and an avalanche of ECB/Fed speakers.

EUR/GBP rebounded as well after last week’s two-day sell-off from 0.90 to 0.87. The pair changes hands around 0.8750. Top EU-officials poured cold poor water over the UK’s latest Brexit proposal, accusing it again from a lack of detail on the solution for the Irish border. PM Johnson meets with German Chancellor Merkel and French President Macron tonight. The Queen’s speech mainly served as an election platform for Johnson if he gets the Brexit deal done by the end of the month. Her speech also reopens parliamentary sessions.

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Chinese prime minister Li said downward pressure on the economy – of which this morning’s dismal trade data is testament to – is increasing. The government will use counter-cyclical adjustments to support economic operations, employment and prices and will expand effective investment, Li was quoted as saying.

Spain’s Supreme Court sentenced 9 Catalan separatist to 9-13 years of prison for sedition after launching a failed independence referendum in October 2017. Four of them were also found guilty for misuse of public funds. The Court’s decision triggered a wave of protests in Barcelona by pro-independence activists.


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