Prime Minister Johnson, however, expressed disappointment over a lack of progress.
Ranges overall were relatively narrow on Wednesday as political uncertainty continued and limited activity. Equities struggled to sustain gains with no progress in US fiscal stimulus talks and global bourses were mixed with limited net losses.
The dollar lost ground when equities rallied, but was little changed overall. USD/JPY dipped to 10-day lows near 105.0 before a limited recovery. EUR/USD settled near 1.1750 as coronavirus concerns undermined currency support.
After early losses, Sterling strengthened sharply amid reports that the UK would continue trade talks with the EU. GBP/USD regained 1.3000, but uncertainty dominated.
Euro-zone industrial production increased 0.7% for August with a 7.2% annual decline and the data was broadly in line with consensus forecasts. ECB council member Villeroy retreated that the central bank was ready to do more if needed and there were further expectations of ECB easing before year-end.
US producer prices increased 0.4% for September with the year-on-year increase also at 0.4% and above market expectations of 0.2% while there was an underlying increase of 1.2% over the year. There were no significant implications for monetary policy with other factors dominating.
Richmond Fed President Barkin stated that the unemployment rate is around 11% when adjusted for the drop in participation rate. He reiterated that the Fed will keep rates low until there is a moderate overshoot in inflation. Vice-Chair Clarida stated that it could be another 12 months before the economy reaches a pre-pandemic peak.
The Euro overall regained some ground as the dollar retreated once again, although there was a lack of momentum with EUR/USD peaking close to 1.1770. The single currency was hampered by a fresh decline in German yields to 5-month lows while the dollar tone was lacklustre.
The Euro was also hampered by concerns over the coronavirus situation, especially as French President Macron declared a national emergency and introduced a curfew in several major cities, although he decided against a second national lockdown. Chancellor Merkel also warned over the situation in Germany as new cases hit a record high. Overall, EUR/USD settled close to 1.1750 and was little change on Thursday as narrow ranges prevailed with dollar selling remained limited.
Chinese new loans increased CNY1900bn for September from CNY1280bn the previous month and above market expectations of CNY1700bn while M2 money supply growth increased to 10.9% from 10.4%. The data maintained expectations that the Chinese economy would make further headway in the short term and underpin the global economic recovery. These expectations were a significant factor in helping to underpin global risk appetite.
US Treasury Secretary Mnuchin stated that it would be difficult to get something done on a stimulus package before the election, although House Speaker Pelosi’s spokesman stated that the talks with Mnuchin had been productive.
The yen gained some fresh support in New York, especially when equities faded, and USD/JPY dipped to 10-day lows near 105.00. Subsequently, Mnuchin stated that he and Pelosi were still far apart on their spending priorities and executing something before the election would be difficult.
Equity futures edged lower in Asia, although caution prevailed with USD/JPY finding support above 105.00 and recovering to around 105.25.
Sterling remained under pressure in early Europe on Wednesday with a GBP/USD retreat to 1-week lows near 1.2860 while GBP/EUR strengthened to 1.1100. There was a sharp reversal later in Europe following reports from sources that the UK would not walk out of trade negotiations with the EU even though no deal was in place. EU sources indicated that some progress had been made in negotiations, but that there were still important differences in the areas of level playing field and fisheries while the EU also wanted strong governance to maintain trust.
There was an important element of relief that talks would continue which boosted Sterling. There were strong GBP/USD gains to above 1.3000 while GBP/EUR reached to 1-month highs near 1.1100. Prime Minister Johnson, however, expressed disappointment over a lack of progress.
US Treasury Secretary Mnuchin stated that it is critical that the UK finishes their deal with the EU so the US can run a deal in tandem. Ahead of the Summit, there were further expectations that the UK would not walk out of talks and expectations that coronavirus considerations will substantially increase pressure to secure a deal on both sides. There will, however, be strong resistance to concessions. GBP/USD held just above 1.3000 with GBP/EUR reaching 1.1100 as uncertainty remained extremely high.
|07:30||CHF PPI (M/M)(SEP)||-||-0.40%|
|07:30||CHF PPI (Y/Y)(SEP)||-||-3.50%|
|09:30||BoE Credit Conditions Survey||-||-|
|13:30||USD Import Price Index (M/M)(SEP)||0.40%||0.90%|
|13:30||USD Export Price Index (M/M)(SEP)||0.4||0.5|
|13:30||NY Empire State Manufacturing Index(OCT)||16.5||17|
|13:30||USD Philadelphia Fed. Manufacturing Index(OCT)||15.5||15|
|15:30||USD Crude Oil Inventories||-||0.501M|