Global equity indices are back in the red with silver sharply higher on conflicting signals from the U.S.-China trade front, writes Adam Button.
The euro is on the backfoot after German PMI manufacturing sustained its sharpest decline in a decade. ECB President Mario Draghi's speech at the European Parliament starts at 9:00 am EDT (2 pm London). Today's appearances from Fed members include NY Fed's Williams, San Francisco Fed's Daly and St. Louis Fed's Bullard (who voted for a 50-bp rate cut last week).
It is official, the Fed's liquidity injections are here to stay for another three weeks. The British pound (GBP) awaits Tuesday's UK Supreme Court ruling on the proroguing of Parliament. Euro shorts stormed back in the latest CFTC data.
Reports and denials about Chinese officials leaving trade talks early highlighted the stakes in the precarious negotiations. Markets were roiled late on Friday on a report that Chinese officials had cancelled a planned trip to Montana and Nebraska. Risk trades dropped on a sign that talks had come undone; something that was underscored by President Trump’s comments suggesting he didn't want a partial deal and was prepared to wait until after the election to get a full deal.
Over the weekend, however, both sides released statements saying that mid-level talks had gone well and that top deputies will meet in October. A New York Times report said the trips were cancelled by the Chinese side to avoid the appearance of political meddling in an area that has been hard hit by halted farm purchases. That led to early buying in Japanese yen crosses. It also underscored how sensitive markets will continue to be to any sign of success or failure in talks.
Looking ahead, GBP traders are eagerly awaiting Tuesday's UK Supreme Court ruling on the proroguing of parliament. In the United States, the September prelim US PMIs from Markit are due. The manufacturing reading is expected at 50.4 and services at 51.5; both improvements from August.
Silver outperforms all, while gold pulls back from Sunday night's high as the Gold/Silver ratio eases back following a sharp rebound.
Fed's Injections Extended to Oct 10
After four bouts of injections last week, the Federal Reserve has decided to hold overnight repo operations for up to $75 billion daily through Oct 10, as well as three 14-day term repo operations on Sept. 24, Sept. 26 and Sept. 27.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
EUR -69K vs -50K prior GBP -86K vs -92K prior JPY +24K vs +33K prior CHF -5K vs -7K prior CAD +20K vs +12K prior AUD -59K vs -61K prior NZD -36K vs -30K prior
Euro shorts had faded to 39K at the start of the month, but they have been rebuilding in the past few weeks and are at the most extreme since mid-June. The divergence in CAD positioning versus the antipodeans continues to diverge.
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
