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The forex markets are staying in quiet consolidative mode today. Sterling trades generally higher and is the strongest one for the time of writing. But the momentum is nothing more than that we see inside corrective trading. That is, rather weak, without follow through. Swiss Franc follows as the second strongest while commodity currencies are soft against all. Still, all major pairs and crosses are bounded in Friday's range, with the except of GBP/USD.

In other markets, European stocks are in positive mood today. FTSE is trading up 0.4%, DAX up 1.07% and CAC up 0.67%. Bond markets also show some calmness with 10 year German bund yield up 0.0012 at 0.308. Italian 10 year yield is down -0.037 at 3.085. Earlier today, Nikkei closed down -0.32% while Singapore Strait Times lost -0.15%. But China Shanghai SSE rose 1.1% to 2698.47, can't get hold of 2700. Hong Kong HSI rose 1.41%. Gold hits as high as 1189.79 but struggles to get through 1190. WTI crude oil staying soft at 65.70.

Technically, one notable development is that USD/CAD is recovering just ahead of 1.3049 near term support. While a break of 1.3049 could trigger some sequential bearish consequences, defending this level will maintain near term bullishness. The development is worth a watch. Nonetheless, Dollar is staying in corrective retreat against Euro and Sterling and that could limit its rebound. Meanwhile, USD/CHF, USD/JPY EUR/JPY and GBP/JPY are bounded in established range and there is no clear sign of breakout yet.

Greece completes three year bailout program, begins a new chapter

European Commission formally announced the conclusion of the three-year stability support program for Greece and "a new chapter" begins. In the statement, EC hailed that "the successful conclusion of the programme is a testament to the efforts of the Greek people, the country's commitment to reform, and the solidarity of its European partners."

European Commission President Jean-Claude Juncker said "the Greek people have responded to every challenge with a characteristic courage and determination." He added that "as the Greek people begin a new chapter in their storied history, they will always find in me an ally, a partner and a friend."

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said "for Greece and its people, it marks the beginning of a new chapter after eight particularly difficult years. And, "for the euro area, it draws a symbolic line under an existential crisis" Moscovici praised "the extensive reforms Greece has carried out have laid the ground for a sustainable recovery: this must be nurtured and maintained to enable the Greek people to reap the benefits of their efforts and sacrifices."

Bundesbank: German growth on sound path, private consumption as linchpin

German Bundesbank noted in the latest monthly report that "economic boom in Germany was still ongoing". In Q2, private consumption "continued its ascent" and was the "linchpin of economic growth". Government consumption also rose "significantly". Exports grew "moderately" following a drop at the start of the year.

Bundesbank expected the economy to "remain on a sound growth path" in Q3 even though the pace could slow from H1. Industry is not expected to make any meaningful contribution to aggregate growth. On the other hand, private consumption remains a key growth driver due to "excellent labour market situation and the current strong wage hikes"

For Eurozone, "the unabatedly positive sentiment among businesses and consumers suggests that the economic upturn in the euro area will continue".

EU Moscovici: It's not necessarily a Brexit deal between UK and EU

European Commissioner for Economic and Financial Affairs Pierre Moscovici talked about Brexit in a French radio interview today. Asked if there would definitely be a deal between the UK and the EU on Brexit, Moscovici said it's "not necessarily".

He also added that "in theory" the Brexit vote can be reversed. He noted "it is up to the British themselves who have made the decision to leave, to decide ultimately if they will or not, and how they will do it." But he also said that "the probability of Brexit is nevertheless very strong because there has been a vote of the people, a referendum…"

UK to publish technical notices on no-deal Brexit preparations

UK Brexit Minister Dominic Raab will meet EU chief Brexit negotiator Michel Barnier in Brussels on Tuesday. Prime Minister Theresa May's spokesman said that "on the agenda will be resolving the few remaining withdrawal issues related to the UK leaving the EU and pressing ahead with discussions on the future relationship."

Raab said that securing a Brexit deal was still "the most likely outcome". But at the same time, the government scheduled to push a series of technical notices for no-deal preparation. Raab added that the government would wanted to "clearly set out the steps that people, businesses and public services need to take in the unlikely event that we don't reach an agreement" with the EU.

The no-deal advice will be due on Thursday and are "sensible, proportionate, and part of a common sense approach to ensure stability, whatever the outcome of talks", according to Raab.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2713; (P) 1.2735; (R1) 1.2771; More...

GBP/USD's recovery from 1.2661 temporary low extends higher today. But it's capped well below 1.2826 minor resistance. Intraday bias remains neutral with further fall expected. On the downside, break of 1.2661 will resume the whole fall from 1.4376 and target 161.8% projection of 1.3362 to 1.2956 from 1.3212 at 1.2555. Though, break of 1.2826 will indicate short term bottoming on bullish convergence condition in 4 hour MACD. And that would bring stronger rebound and lengthier consolidation first.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4091). Current downside acceleration argues that it's possibly resuming long term down trend. In any case, outlook will stay bearish as long as 1.3212 resistance holds. Retest of 1.1946 should be seen next.

Economic Indicators Update

The Canadian dollar is showing little movement in the Monday session. Currently, USD/CAD is trading at 1.3071, up 0.07% on the day. In economic news, there are no data releases on either side of the border. On Tuesday, Canada releases Wholesale Sales.

The Canadian dollar ended the week with strong gains, climbing 0.07 percent. The boost to the currency came from a strong CPI report, with a gain of 0.5%. This easily beat the estimate of 0.1% and marked a 5-month high. On an annualized basis, CPI jumped 3.0%, its highest level since 2011. The strong inflation report has raised expectations that the Bank of Canada will raise rates at the September meeting. The likelihood of a quarter-rate hike next month is only 33%, but this rises to 75% for an October hike, if the BoC stays on the sideline next month.

After months of an escalating trade war between the U.S and China, the markets are hoping that talks between the sides will reduce tensions. The two economic giants will hold low-level trade talks this week in Washington, and although a dramatic breakthrough is unlikely, the fact that the two sides are talking has investors cheering. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled for August 23. If the negotiations lead to the suspension of the upcoming tariffs, risk appetite would rise and likely give a boost to the Canadian dollar.

Here are the latest developments in global markets:

FOREX: Dollar/yen continued to pare Friday’s losses, last seen at 110.62 (+0.13%), while the dollar index, which gauges the dollar’s strength versus six major currencies, was also in recovery mode, trading at 96.30 (+0.21%), helped by a weaker euro and pound. Euro/dollar was on the back foot at 1.1422 (-0.15%), after rising softly the past two days, with investors worrying that the political turmoil between the US and Turkey could weigh on the Eurozone’s banking sector. On Monday, the Turkish President, Tayyip Erdogan, maintained his harsh tone, saying in a pre-recorded message on the Eid-al-Adha religious festival that “an attack on Turkey’s economy was no different from a strike against its flag or call to prayer”. Pound/dollar rose to 1.2765 (+0.13%), with Brexit uncertainties holding gains limited as the UK government has yet to find an agreement with the EU on its departure terms, around seven months before Britain leaves the bloc. In the antipodean sphere, aussie/dollar slipped to 0.7304 (-0.05%) ahead of the RBA’s meeting minutes due early on Tuesday, while kiwi/dollar declined to 0.6610 (-0.39%) on the back of a stronger dollar. Dollar/loonie edged up to 1.3070 (+0.08%).

STOCKS: European stocks opened higher on Monday on hopes the US and China could hold talks this week to make progress on their trade disagreements. The benchmark STOXX 600 and the blue-chip Euro STOXX 50 were up by 0.52% and 0.47% respectively at 1150 GMT. The German DAX 30 gained 0.92%, the French CAC 40 rose by 0.54%, while the British FTSE 100 climbed by 0.31%. The Italian FTSE MIB was steady. US futures tracking the S&P 500, Nasdaq 100 and Dow Jones were flashing green, pointing to a positive open later today.

COMMODITIES: WTI crude was lower at $65.81/barrel (-0.21%) early in the European session and the London-based Brent was trading higher at $72.06 (+0.33%), with tensions between the US and Iran supporting prices. Note that the first round of US renewed sanctions which target car parts and metals took effect on August 6, while the US administration prepares to kick off another wave of sanctions early in November to hit Iran’s oil industry. In precious metals, gold maintained its short-term bullish mood, reaching an intra-day high of 1,189.79 (+0.31%).

Day Ahead: US-China trade talks in focus; RBA minutes pending

In the absence of any major economic releases later in the day, the trade story will remain on center stage as investors will be eagerly waiting for a sign confirming that US and Chinese officials are meeting in Washington this week, probably on August 21 and 22. While markets hope for the gathering to de-escalate tensions, the talks could deliver little given that they are to be held between low-level officials.

Moreover, early on Tuesday, at 0130 GMT, the Reserve Bank of Australia (RBA) will be publishing minutes from its latest policy gathering that took place on August 7. During that meeting the Bank left the cash rate unchanged at a record low of 1.5% as expected, while it also revised its near-term inflation forecasts lower but expressed that the unemployment rate will decline further to 5.0% over the next couple of years compared to 5.25% predicted in previous statements. Subsequently, markets are now pricing a rate hike coming only around the end of 2019.

Elsewhere, the Bank of Canada Senior Deputy Governor, Carolyn Wilkins, will be participating in a panel discussion at 1215 GMT, while Atlanta’s Fed President, Raphael Bostic, a voting FOMC member in 2018, will be speaking on the US economic outlook at 1500 GMT.

The DAX index has started the week with strong gains. Currently, the pair is trading at 12,322, up 0.92% on the day. On the release front, German inflation disappointed. PPI dropped to 0.2%, short of the estimate of 0.4%.

There were no surprises from eurozone inflation reports in July. Final CPI came in at 2.1%, edging above the 2.0% gain in June. Final Core CPI followed the same trend, with a gain of 1.1%, compared to 0.9% in June. Both indicators matched the estimates. At the same time, inflation remains well below the ECB target of just below 2.0%, so an interest rate hike is unlikely before the second quarter of 2019. The focus remains on the ECB’s asset-purchase program, which is expected to wind up in December.

August has been dismal for German stock markets, and the DAX has declined 2.9% this month. However, the DAX posted gains last week, boosted by the announcement that the U.S and China had agreed to hold trade talks this week in Washington. This follows months of escalating trade tensions, which have dampened risk appetite. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled for August 23. A dramatic breakthrough at the upcoming talks is unlikely, but if the upcoming tariffs are put on hold, investor sentiment would improve and the equity markets would likely respond with gains.

Entering into US session, Sterling catches a bid and is trading as the strongest one for today so far. Swiss Franc follows as the second strongest, then Dollar. On the other hand, New Zealand Dollar is the worst performing one, followed by Euro and than Australian Dollar. Though most of the pairs are bounded in Friday's range, with the exception of GBP/USD and EUR/AUD only.

In other markets, European indices are generally higher today, with DAX leading the way up 0.96% at the time of writing. CAC is up 0.62% while FTSE is up 0.33%. 10 year German bund yield trades nearly flat today, up 0.005 at 0.311. Italian 10 year yield eased back, down -0.047 at 3.075.

In Asia, Nikkei closed down -0.32% while Singapore Strait Times lost -0.15%. But China Shanghai SSE rose 1.1% to 2698.47, can't get hold of 2700. Hong Kong HSI rose 1.41%. 10 year JGB yield rose 0.0001 to 0.095.

The economic calendar is rather empty today. Main features are speeches of BoC Governing Council member Wilkins, Fed Bostic and Bundesbank head Weidmann.

Notes/Observations

• Currency crisis in Turkey and trade talks between the US/China likely to remain in focus this week; Fed’s Jackson Hole symposium begins Thursday evening
• Minutes from the recent Fed and ECB meetings will be released on Wednesday and Thursday Asia:
• US and China reportedly plot roadmap to resolve trade dispute before President Trump-Pres Xi meeting in Nov
• South Korea government said to plan to increase the 2019 budget by 9.7% to KRW470T

Europe:

• ECB's Weidmann (Germany): On course to normalize monetary policy and reiterates that process would be gradual
• Germany Finance Ministry Monthly Report noted that the persistent debate about tariffs and the threat of a trade war was choking trade activity. Cited Turkey as a global economic risk
• Moodys cuts Turkey sovereign rating one notch to Ba3 from Ba2; outlook negative
• S&P cuts Turkey sovereign rating one notch to B+ from BB-; outlook stable
• S&P affirmed Hungary sovereign rating at BBB-; outlook positive
• Fitch affirmed Russia sovereign rating at BBB-; outlook Positive
• ESM: Greece had successfully concluded its bailout program (as expected)
• Italy expected to launch its infrastructure plan in Sept
• Italy’s PM office's Giorgetti. Hopes ECB quantitative easing will be extended
• First 'no-deal' technical notices to be published on Thursday, Aug 26th

Americas:

• White House Chief Economist Hassett: we are very close to trade deal with Mexico. Still a few sticking points in trade discussions
• White House Counsel Don McGahn has cooperated extensively in Mueller Inquiry
• US administration has rejected efforts by Turkey to link the release of US Pastor Brunson with relief for Turkish bank Halkbank which faces potential fines for violating US sanctions on Iran
• Venezuela President Maduro announces massive 95% devaluation with new FX rate tied to Cryptocurrency

Energy:

• Senior Iranian diplomat said to have asked OPEC Sec Gen Barkindo to keep OPEC away from political agenda of some member

Economic Data:

• (DE) Germany July PPI M/M: 0.2% v 0.2%e; Y/Y: 3.0% v 3.0%e
• (SE) Sweden Q2 Industry Capacity: 90.9% v 90.3% prior
• (TW) Taiwan July Export Orders Y/Y: 8.0% v 2.9%e
• (PL) Poland July Sold Industrial Output M/M: -5.3% v -5.7%e; Y/Y: 10.3% v 10.0%e; Construction Output Y/Y: 18.7% v 22.3%e
• (PL) Poland July PPI M/M: 0.1% v 0.1%e; Y/Y: 3.4% v 3.5%e
• (CH) Swiss Total Sight Deposits w/e Aug 17th (CHF): 576.7B v 576.1B prior; Domestic Sight Deposits: 472.6B v 473.4B prior
• (GR) Greece Jun Current Account: €0.2B v €0.2B prior
• (PH) Philippines July Overall Balance of Payments (BOP): -$0.5B v -$1.2B prior
• (TW) Taiwan Q2 Current Account: $17.8B v $19.4B prior
• (EU) Euro Zone Jun Construction Output M/M: 0.2% v 0.3% prior; Y/Y: 2.6% v 2.0% prior

Fixed Income Issuance:

• (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 3-month bills; Avg Yield: 0.68% v 0.71% prior; Bid-to-cover: 2.68x v 2.58x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.6% at 383.3, FTSE 0.6% at 7600, DAX +1.0% at 12338, CAC-40 +0.6% at 5379, IBEX-35 +0.6% at 9474, FTSE MIB +0.1% at 20438, SMI +0.3% at 9034 S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European Indices trade higher across the board tracking strong Asian Indices and US futures. Italian shares in focus after reports of the Government launching a potential €80B infrastructure plan in Sep to rebound Countries infrastructure. Atlantia shares trade almost 10% lower as the Government said to plan special decree to strip Autostrade concessions, while motorway operators SIAS and ASTM trade lower after talks of potential nationalization of Italian Motorways. Elsewhere G4S trades lower after the UK Gov temporarily takes over a G4S operated prison due to conditions. On the earnings front Mulberry is a niotable decliner following a profit warning, while NMC Health trades higher after an ipbeat trading statement. In the US PepsiCo announced the acquisition of SodaStream in a $3.2B deal. Looking ahead notable earners include Estee Lauder and Black Box Corp.

Movers

• Consumer Discretionary G4S [GFS.UK] -1% (UK Gov takes over failing Birmingham Prison from G4S), Mulberry [MUL.UK] -20% (profit warning)
• Industrials John Wood Group [WG.UK] +1.2% (Contract win), Subsea 7 [SUBC.NO] +2.6% (Contract win), Salini Impregilo [SAL.IT] +3.5% (Sells unit to Vinci), Atlantia -8% [Gov planning special decree to revoke Autostrade of concession)
• Healthcare NMC Health [NMC.UK]+5% (Trading update)

Speakers

• Italy Dep PM Salvini stated that could not confirm of plan to write AD-HOC law to revoke concessions in the country (aka nationalization of roads), have begun the process on revoking concession on Autostrade
• Turkey President Erdogan reiterated Turkey has power and ability to overcome everything
• Poland Fin Min Czerwinska reiterated view that saw 2018 GDP growth below 5% level
• South Korea President Moon said to call for an aggressive fiscal policy and asked aides to prepare comprehensive steps for jobs
• Indonesia Central Bank official Hendarsah: To maintain presence in market to maintain confidence (**Note: refers to dual intervention in FX and bond markets)

Currencies

• FX markets appeared to be mired in the mid-August doldrums but the currency crisis in Turkey and trade talks between the US/China would likely to remain in focus this week. Also of interest was the Fed’s Jackson Hole symposium that starts on Thursday with Fed Chair Poweel speech on Friday.
• EUR/USD was softer by 0.3% and holding above the 1.14 level. The Italian budget remained in focus with reports that Italy would launch a €30B infrastructure plan in Sept which would blow out EU budget-deficit rules. The 1.15 arae remained key resistance in the pair.
• USD/Try was higher by over 1% after Friday's sovereign downgrades by Moody's Investors Service and S&P Global Ratings on Turkey. One analyst nnvisioned TRY currency (Lira) weakening towards 8.0 area before reaching the pain threshold that would likely compel Turkey to compromise on some of its strategic objectives.
• The pending resumption of US-China trade talks prompted analysts to speculate whether US could pressure China to take measures to keep the yuan from falling further. The yuan has fallen about 7.5% in about 2 months versus the dollar. China PBoC did set its yuan reference rate a tad stronger in the Asian session today (6.8718 v 6.8894 prior)

Fixed Income

• Bund Futures trades at 163.53 down 3 ticks retracing some of the move as European Indices trade higher. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
• Gilt futures trades at 123.64 down 3 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
• Monday 's liquidity report showed Friday's excess liquidity fell from €1.898T to €1.872T. Use of the marginal lending facility was unchanged from €128M to €128M.
• Corporate issuance saw high grade issuers raising $29.6B in the primary market last week.

Looking Ahead

• (BR) Brazil Aug CNI Industrial Confidence: No est v 50.2 prior
• (SA) Saudi Arabia Jun Oil Production: No est v 10.03M bpd prior – JODI
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month Bills
• 06:00 (PL) Portugal July PPI M/M: No est v 0.6% prior; Y/Y: No est v 4.0% prior
• 06:00 (DE) German Bundesbank Monthly Report
• 06:45 (US) Daily Libor Fixing
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 07:30 (CL) Chile Q2 GDP Q/Q: 0.7%e v 1.2% prior; Y/Y: 5.2%e v 4.2% prior
• 07:30 (CL) Chile Q2 Current Account Balance: No est v -$0.3B prior
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
• 08:55 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month BTF Bills
• 09:30 (NZ) Fonterra Global Dairy Trade Auction
• 09:30 (EU) ECB announces Covered-Bond Purchases
• 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
• 11:00 (US) Fed’s Bostic (dove, voter) in TN
• 11:30 (US) Treasury to sell 3-month and 6-month Bills
• 16:00 (US) Weekly Crop Progress Report

The euro has fallen back towards the 1.1400 support level after buyers failed to trigger the bullish inverted head and shoulders pattern this morning. The EURUSD pair is only intraday bullish while trading above the 1.1400 support level and now risks deeper losses towards the 1.1370 level if price trades below this key technical area. Buyers will look to break the 1.1440 level, while sellers will attempt to defend the 1.1400 area.

The EURUSD pair is bullish while trading above the 1.1400 level, key resistance is found at the 1.1440 and 1.1480 levels.

If the EURUSD pair moves below the 1.1400 level key intraday support is found at the 1.1370 and 1.1335 levels.

The British pound continues to recover higher against the US dollar in early week trade, as the GBPUSD pair moves away from extremely over-sold trading conditions. The GBPUSD pair retains an intraday bullish bias while trading above the 1.2700 support level. Caution is advised, as the MACD indicator across the four-hour time frame appears to suggest that sterling may soon fall if short-term buyers fail to break the current daily trading high.

The GBPUSD pair is only bullish while trading above the 1.2700 level, key resistance is found at the 1.2744 and 1.2800 levels.

If the GBPUSD pair moves below the 1.2700 level, key intraday support is found at the 1.2682 and 1.2660 levels.

Monday August 20: Five things the markets are talking about

With “risk-on and off” trading strategies dominating proceedings this summer, expect this to be another action packed week despite the lack of economic data releases.

A stronger U.S dollar and higher interest rates are pushing EM economies into 'bear' territory and their respective currency pairs have seen extreme volatility even in presence of the own central banks – TRY, RUB, IDR, INR.

Lower-level officials from China will meet in Washington (Aug 21/22) and try and work towards a solution to their escalating trade conflict between the worlds two largest economies.

In Europe, investors are beginning to set their sights on Italy, as politics and budget concerns have EUR 'bulls' worried.

Due to the EM meltdown and weaker domestic fundamentals, the Chinese yuan is threatening to trade through the psychological key ¥7 handle for the first time in a decade. Expect the People's Bank of China (PBoC) to defend any further yuan weakness, especially through the trade talks.

Fed Chair Powell is scheduled to speak on Friday (Aug. 24), at the annual global central bank conference in Jackson Hole. He will speak on “monetary policy in a changing economy.”

On tap: There are no central bank meetings this week, but there will be a lot of central bank speeches and copy. AUD monetary policy minutes (Aug 20), NZD retail sales (Aug 21), CAD retail sales & FOMC meeting minutes (Aug 22), ECB monetary policy meeting minutes (Aug 23) and U.S core-durable goods orders (Aug 24).

1. Global stocks find support

Contagion worries continue to have an impact on investor risk sentiment, especially in emerging markets.

Overnight, there were advances across most Asian equities, although Japanese stocks bucked the upward trend. The Nikkei fell as tech stocks weakened, while trading was thin as investors' awaited developments from trade talks expected between the U.S and China this week. The Nikkei share average dropped -0.3%, while the broader Topix declined -0.3% in the lowest traded volume in four-months.

Down-under, Aussie stocks edged a tad higher, as cautious outlook from retailers offset gains from materials stocks, which were supported by upcoming U.S/Sino trade talks. The S&P/ASX 200 index added +0.1% after recording a +0.2% gain on Friday. In S. Korea, the Kospi stock index (+0.4%) and the won edged higher overnight on improved investor sentiment.

In Hong Kong, stocks rebounded overnight, led by IT and resources shares, as a stabilizing yuan (¥6.8446) improved risk appetite. The Hang Seng index rose +1.4%, while the China Enterprises Index gained +1.1%.

In China, stocks recovered from a 30-month low to close higher on Monday after a report that China's securities regulators (CSRC) summoned brokerage analysts for views on the market improved investor sentiment. The Shanghai Composite index ended up +1.1%, while the blue-chip CSI300 index ended +1.17% higher.

In Europe, regional bourses trade higher across the board, tracking a stronger Asian session and U.S futures.

U.S stocks are set to open in the 'black' (+0.2%).

Indices: Stoxx600 +0.6% at 383.3, FTSE 0.6% at 7600, DAX +1.0% at 12338, CAC-40 +0.6% at 5379, IBEX-35 +0.6% at 9474, FTSE MIB +0.1% at 20438, SMI +0.3% at 9034 S&P 500 Futures +0.2%

2. Brent oil prices stabilize

Brent crude oil prices stabilize atop of +$72 per barrel overnight after several weeks of decline, weighed down by concerns over slowing global economic growth but supported by an expected fall in supply from Iran due to U.S sanctions.

Brent crude futures are at +$72.11 per barrel, up +28c, while U.S West Texas Intermediate (WTI) crude futures are up +3c at +$65.94 per barrel.

Note: Last week, Brent declined for a third consecutive week, while WTI fell for a seventh week due to concerns about a slowdown in economic growth.

Expect investors to take their cue from this weeks trade Sino/U.S trade talks in Washington (Aug 21/22).

Ahead of the U.S open, gold prices have edged a tad higher as investors found the 'yellow' metal attractive after prices fell to a 19-month low last week, while a stronger dollar is capping market gains ahead of planned U.S trade talks. Spot gold is up +0.2% at +$1,186.33 an ounce, after touching its lowest since January 2017 at +$1,159.96 on Thursday. U.S gold futures are up +0.7% at +$1,191.60 an ounce.

3. Turkish bonds to face pressure after downgrades

Turkish government bonds have come under renewed pressure after Friday's downgrades by Moody's Investors Service and S&P Global Ratings.

Moody's cut its rating on Turkey to 'Ba2' from 'Ba3' and changed the outlook to negative, citing the continuing weakening of Turkey's public institutions and the related lower predictability of Turkish policy making.

S&P cut Turkey to 'B+' from 'BB-' with stable outlook, pointing to the substantial weakening of the lira ($6.1168) with its negative fiscal implications and strain of corporate balance sheets.

Note: Due to a religious holiday, markets are closed in Turkey this week, which will reduce liquidity and could amplify TRY volatility.

Elsewhere, the yield on 10-year Treasuries has decreased less than -1 bps to +2.86%, the lowest in more than a month. In Germany, the 10-year Bund yield has gained +1 bps point to +0.31%, while in the U.K, the 10-year Gilt yield increased less than +1 bps to +1.236%.

4. Dollar remains in vogue

The currency crisis in Turkey and trade talks between the U.S/China this week will dictate currency price moves.

Overnight, EUR/USD (€1.1406) is a tad softer by -0.3% and holding above the psychological €1.14 handle. The Italian budget remains in focus with reports that Italy would launch a +€50B infrastructure plan next month. If so, this would blow out E.U budget-deficit rules. The €1.15 area remains the key resistance.

USD/TRY ($6.1168) is higher by over +1% after last week's sovereign downgrades by Moody's and S&P Global Ratings on Turkey. Analysts consensus sees TRY weakening towards $8.0 area before reaching the pain threshold that would likely compel President Erdogan to compromise on some of his strategic objectives.

The pending resumption of U.S/China trade talks has prompted the market to speculate whether the U.S could pressure China to take measures to keep the yuan from falling further. The Chinese yuan remains under pressure and is threatening to trade through the psychological key ¥7 handle for the first time in a decade. The Yuan has lost around -10% in the last five months, with trade tensions adding to worries about a slowing economy – Chinese fixed asset investment, industrial output and retail sales data last week were all on the soft side.

Note: China PBoC did set its yuan reference rate a tad stronger in the Asian session today (¥6.8718 vs. ¥6.8894 prior).

5. U.K house prices drop -2.3% in August

U.K data Sunday showed that domestic house prices dropped -2.3% in August from July, as new sellers launched a “late summer sale” to try and find a buyer more quickly, according to figures released by Rightmove.

The decline was steeper than the -2.1% drop seen in August last year, with the more subdued London market and the South East weighing on the national average.

On an annual basis, meanwhile, prices were up +1.1%, but this was down from a +1.4% increase in July.

Digging deeper, in London, the price of property coming to market was down -3.1% on the month in August, resulting in an annual rate of decrease of -1.2%. In the South East, prices were down -2.3% on the month and up +0.6% on the year. Ex- those two regions, the rest of the country saw a monthly decline of -1.5%.

EUR/USD is trading lower in the Monday session. Currently, the pair is trading at 1.1409, down 0.26% on the day. With little on the data calendar, traders can expect a quiet start to the week. German PPI dropped to 0.2%, short of the estimate of 0.4%. The sole U.S event is a speech from FOMC member Rafael Bostic.

The euro ended the week with modest gains, as eurozone CPI reports showed slight improvement in July. Final CPI came in at 2.1%, edging above the 2.0% gain in June. Final Core CPI followed the same trend, with a gain of 1.1%, compared to 0.9% in June. Both indicators matched the estimates. At the same time, inflation remains well below the ECB target of just below 2.0%, so an interest rate hike is unlikely before the second quarter of 2019. The focus remains on the ECB’s asset-purchase program, which is expected to wind up in December.

After months of an escalating trade war the U.S and China, the markets are hoping that talks between the sides will reduce tensions. The two economic giants will hold low-level trade talks this week in Washington, and although a dramatic breakthrough is unlikely, the fact that the two sides are talking has investors cheering. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled for August 23. If the negotiations lead to the suspension of the upcoming tariffs, risk appetite would rise and the euro could gain ground. It’s been a dreadful August for the euro so far, as the currency has fallen 2.4%.