News on Brexit, ECB & Hong Kong Sparking Risk-on Sentiment for Markets
September 4, 2019
The US dollar is weaker against its peers following a UK Parliament vote to make a no-deal Brexit less likely, a report that Hong Kong’s Chief Executive Carrie Lam will announce a withdrawal of controversial extradition bill, and comments from ECB President Christine Lagarde suggesting monetary policy stimulus will not be expanded.
“In a gentle way, you can shake the world.”
September 4, 2019
EUR/USD 1.1014 GBP/USD 1.2184 USD/CAD 1.3335 AUD/USD 0.6785 USD/JPY 106.25 USD/CNH 7.1507 USD/ILS 3.5270 USD/MXN 19.7950 USD/CHF 0.9843 USD/INR 72.1175
The dollar is lower against most of its peers due to risk-on sentiment and weak domestic economic releases. Surprisingly weak ISM data sparked more concern for a slowing economy in the US. Traders await employment data to be released on Friday morning. The outcome of this data could influence the next monetary policy move for the Federal Reserve.GBP
Sterling strengthened by 1% as traders now expect a no-deal Brexit will be less likely. UK Parliament voted to restrict Prime Minster Boris Johnson from moving forward with a no-deal Brexit on October 31, and to delay Brexit by 3 months. BoJo’s response was to insist on a snap election, where he would need two-thirds of the House of Commons to vote for his Brexit plan. Since he has now already lost his majority, this will be highly unlikely.EUR
EUR/USD broke above $1.10 following comments from ECB President Christine Lagarde suggesting that the ECB will not implement further monetary stimulus. Eurozone PMI data showed a slight uptick in pace of economic growth at around 0.2%. While the Eurozone economy is growing, it is doing so at a slow pace which added to speculation for a rate cut at next week’s ECB meeting.CAD
USD/CAD is lower this morning ahead of the Bank of Canada meeting. Investors are split on what decision Governor Poloz will make for Canada’s key interest rate. The argument for a rate cut is based on economic uncertainty given the continued trade wars and escalated fears of a recession. Higher oil prices have also supported the strengthening Canadian dollar. WTI Crude is up 1.5%.ASIA/PACIFIC
Japanese yen weakens on risk-on sentiment as demand for safe heaven assets diminishes. News that Hong Kong will formally withdraw the controversial bill that sparked island-wide protests has supported the risk-on sentiment.
Aussie dollar is higher from risk-on sentiment, and for a second day after the release of Q2 GDP growth at 0.5% QoQ, in-line with expectations.