The U.S. dollar remains elevated but is under modest pressure to start the week.
Overview
News of a nearing breakthrough on a trade agreement between China and the U.S. over the weekend has brightened sentiment but U.S. equities are still expected to fall at the open. Top economic adviser Larry Kudlow said that the two sides are “closer and closer” to a trade deal. Intellectual property seems to continue to be the stickiest issue.
The economic docket may shake markets out of its tight ranges. At 10 a.m. Factory orders and Durable good will cross the wire. Both headline prints are expected to show contraction which could add additional warning signs for the U.S. economy. Consumer inflation data will be released tomorrow morning followed by the minutes of the latest Federal Reserve monetary meeting on Wednesday. Fed Futures currently show a 57% chance the Federal Reserve will cut rates before the end of the year, which would put downward pressure on the greenback.
What to Watch Today…
- Factory Orders and Durable Goods at 10 a.m.
Complete Economic Calendar can be found here.
EUR
After repeatedly flirting with 21-month lows last week, the common currency is advancing this morning. Today’s economic docket was light but the week is full of potential risk events. While news surrounding the US/China trade deal dominates domestic headlines, we must be reminded that a serious EU-Chinese summit is scheduled to take place tomorrow. The European Central bank is set to meet at on Wednesday on the heels of a slew of disappointing data released on the ancient continent that past few weeks.
GBP
Sterling faces another big week as the U.K.’s newest deadline is Friday. Cross party talks between Prime Minister Theresa May and Labour leader Jeremy Corbyn have to be restarted as the two sides only have days to complete a deal or risk crashing out of the EU. EU leaders will meet in Brussels on Wednesday on whether to grant the U.K. and extension and then the length of the extension. We see a long extension to Article 50 as the most likely scenario, which would likely mean status-quo for GBP/USD. However, if a deal is struck, expect the sterling to rise. In the unlikely event of a “No-Deal” Brexit on Friday, the sterling will suffer losses similar to the aggressive price action last seen after the election results nearly three years ago.
