Euro Rises Ahead of Optimism in Trade Talks

In the news this week is the report filtering in about the progress made in US-China trade talks over the weekend. Reports indicate a video conferencing between top US trade officials and a Chinese top government official over the weekend. Though the details of the conference call are yet to be finalized, this has sparked up hopes in investors propping up the Euro, undermining the safe havens.

At the time of this report, the euro edged higher than 1.1072 versus the USD while consolidating its gains. The trade war which had lasted close to 16 months had both countries slapping tariffs on their respective goods. Reports, however, came in a few weeks ago that both countries were nearing a preliminary phase agreement. The progress seemed to be made in the trade talks was stalled as US President revealed it wasn’t removing some punitive tariffs. Investors were unsure of when the preliminary deal will be signed as China needed a bit of reassurance.

On Friday, the US commerce secretary made optimistic remarks while over the weekend, reports came in of a constructive talk between US-China top officials. Though the final decision by the US president, Donald Trump is yet to be heard, investors eagerly await the President’s tweet later in the day.

One question for sure on the mind of investors is if the President is willing to remove the extra tariffs? Also because of the December 15 deadline posed by the US for the preliminary phase agreement to be reached, in which Trump had threatened increased tariffs if it fails is an item to consider in which it seems that the United States stance still holds steady.

Also in the market highlights for this week is central bank activity.

Central Bank Activity
A top official of the Federal Reserve has reiterated that the Fed’s decision to hold steady its interest rate cut after embarking on a three-time cut this year is supportive of the US economy. Later on this week, minutes of a follow-up meeting to explain the Fed’s monetary stance will be released.

Also this week, speeches from ECB top officials are on. Those to influence the market will most likely be Luis de Guindos who is currently serving as the Vice president and Phillip lane who is the Chief economist. Most likely the subject of discussion will be a clarion call to the governing bodies to cover more grounds.

In the news last week, Germany barely escaped a recession, therefore it is expected that fiscal decisions may hold steady in light of this.

Euro, South African Rand Bounces Ahead of ECB Head, Christian Lagarde’s Speech

The week started on a quiet note for major currencies after the Tokyo event while investors eagerly await the first official speech from Christian Lagarde, the new head of ECB.

For currency pairs, the dollar maintained a significant price of 97.218, having dropped to 97.107 on Friday which is a low recorded between august to date. It hopes to reach a significant low of 97.033 recorded in August. The dollar had tried to bounce back on Friday after news of surprising US payrolls but its rise was undermined by a soft manufacturing survey which pulled it down. The greenback fared slightly better than the Chinese yen the previous week. The US dollar had been battling to maintain a stronghold after the federal reserves slashed interest rates last Wednesday.

Euro had started the week solidly at $1.1168 while almost nearing the October height of $1.1179 and a 200-day moving average of $1.1195.

Sterling also maintained a significant price of $1.2935 after it bounced back to $1.2200 the previous month as investors remain less apprehensive about a Brexit hard blow in the face of the upcoming elections.

South African Rand
The rand reportedly rose up over a percent at 14.8650 per dollar, retracing back after last week’s sharp drop. The rise could be traced to the fact that investors heaved a sigh of relief following Moody’s latest decision as regards the country’s debt.

Chinese Yen
Safe havens currency, Yen, witnessed a drop as captured on Friday’s low of 107.87 while retracing back slightly to 108.23.

Impact of Interest rate slashing moves on major currencies
Analyzing the impact of interest rate cutting being undertaken by the central banks, an analyst put it that an imminent reduction in volatility among major currencies and this step seems unanimous thereby creating a common policy ground. Therefore currencies with the biggest interest rates like AUD, USD, NZD, and CAD will become weaker. This, therefore, could have prompted the losses recorded on USD and CAD the previous week.

Norwegian and Swedish currencies topped the gainer’s chart based on the stable interest rate and a predicted rise in months to come.

Ahead this week, Central banks in Australia and UK are holding decisive meetings on policy updates while the much-awaited speech of ECB head, Christian Lagarde is upcoming with analysts predicting that there might not be a significant policy change. Also, seven fed speakers are setting the stage for their speeches this week. Investors are also on the look-out for the eventualities of china –US trade talks.

After Saving the EURO, Draghi Bows out While Leaving the ECB Fragile Than Any Other Time in Recent Memory

Topline: Mario Draghi is finishing his eight-year term at the European Central Bank toward the month’s end.

Nonetheless, his choices generally have set off an uncommon fragility inside the institution.

Experts are of the premonition that Draghi will consistently be associated with his “whatever it takes” discourse.

His policy will conform to three words — “whatever it takes” — yet as President Mario Draghi gets ready to leave his position at the European Central Bank (ECB), questions are rising about the accomplishment of the strategic policies he executed.

Draghi is finishing his eight-year term at the ECB toward the month’s end. Be that as it may, his choices generally have set off an uncommon fragility inside the institution.

The ECB has attempted to accomplish its principal task — guaranteeing an inflation level of “close however beneath 2% over the medium-term” in the wake of the sovereign debt emergency of 2011. Simultaneously, the expanding monetary difficulties, for example, the trade dispute, Brexit and more fragile production information, have stacked further weight on the institution act.

This finished in a new phase of intervention measures in September, which incorporated another phase of government security buying.

This resulted in “genuine fragility inside the ECB,” Florian Hense, eurozone financial analyst at Berenberg bank, stated in a note concerning the intervention measures.

“For ECB plans to be compelling, Christine Lagarde should quiet the discussion and by extension fill the loopholes when she begins her new position as ECB president in November,” Hense said about Draghi’s successor.

Individuals from the institution have communicated their concerns over the viability of the strategy measures just as their scale. This has likewise been a concern among certain market analysts, who question the advantages of an ultra-free money related plan.

The Eurozone Future, What It Holds?
The sovereign debt emergency of 2011 had an enduring effect on the eurozone, incompletely because of the broken political sentiments over the euro bloc nations. While they all use similar money and financial strategy applies similarly, the monetary plan is an issue chosen at the national level.

Thus, when the emergency hit, the eurozone had neither the institutional effectiveness nor the focal administration to manage it.

“Draghi encouraged the finishing of the European institutional system, which is eventually expected to take into consideration the maintainability of the single money and the European venture in totality. In any case, progress has been constrained,” Dall’Angelo said.

She noticed that the financial association, which plans to make banking grades and supervision equivalent over the eurozone, and the capital markets association, which hopes to offer more extensive sources of funds, have not been finished.

“As Draghi leaves, the European venture is losing one of its principal champions, making the work to unite the bloc more difficult,” Dall’Angelo from Hermes Investment said.

Dollar Slides as Positive Fundamentals on Brexit Boost Pound and Euro

The U.S dollar was trading at its lowest period from January 2018 on Monday as discontinuous influxes of positive fundamentals on Brexit gave a boost to the pound to a multi-month high and helped the euro stay abreast of its challenges in October.

Albeit Prime Minister Boris Johnson during the weekend was constrained by his adversaries to dispatch a letter to Brussels looking for a deferral to Britain’s exit from the European Union while UK legislators postponed a decision on an improved Brexit bargain, the forex market showed conditional expectations that it would, in the long run, be passed.

Versus the dollar, the sterling was recently up 0.1% during the American Session, having broken past the price level at $1.30 without precedent in the past few months. The euro was 0.18% higher against the dollar, having likewise been boosted by Brexit positive fundamentals this month by 2.23%.

While the effect of Brexit on sterling is self-evident, euro-USD’s reaction to lessened Brexit fears has most likely been bigger than what we had anticipated. This proposes a great deal of the shortcomings in the euro over the past couple of months was being driven by Brexit concerns and as those are lessening, we’re seeing the euro draw nearer to where we figure it ought to have been all along dependent on rate differentials.

The U.S. Dollar Perceived Weakness
The U.S. dollar is down about 2.1% this month versus a group of six counter currencies which, if it remains as such, would be its most noticeably terrible month since January 2018.

It floated at $1.115 per euro on Monday however figured out how to trend higher to 108.52 versus the Japanese yen. The yen has been frail as well, having hit more than a month low recently.

The U.S. dollar has additionally crashed as a result of a background of lower data from the U.S including poor retail sales which crashed for the first time within seven months in September while households cut spending on automobiles, building materials, hobbies, and online transactions.

Generally, there exists some risk ahead on data expected from the U.S which is setting the pace for the dollar’s low strength.