Forex - Asia Highlights - Wednesday, 21 August 2019


 04:30 (GMT) 21 Aug

  [Forex Highlights]

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Asia Highlights - Wednesday, 21 August 2019 (0101-NKWS-C01)

US Overview

European politics the main focus on a quiet US day, BTPs rallying after Conte resigns and mkt hopes for swift resolution while GBP firms after warmer Merkel comments on seeking backstop solution, despite the lack of shift on the withdrawal agreement.

US Highlights:

- Italy PM Conte resigns, focus now moves to president Mattarella's next move.

- Germany's Merkel says will think about practical solutions to backstop issue, EU is ready to find a solution. Adds though that would not require withdrawal agreement to be re-opened, instead a question for the future ties declaration

- US Secretary of State Pompeo says Huawei and other Chinese companies pose security threat to US. Expects talks to continue.

- Trump - Fed needs to be proactive and cut interest rates; administration looking at possible tax cuts, always looking at payrolls tax, not talking about doing anything now. US very far from a recession

- Philly Fed Non-manufacturing business outlook survey +8pts to 32.5

Currencies:
The GBP and the EUR weakened in the European morning. Markets reacted negatively to Boris Johnson's letter to Donald Tusk seeking the removal of the Irish backstop, with GBP falling across the board. But comments from Merkel in the afternoon triggered a sharp GBP recovery as she indicated she would think about practical solutions to the backstop problem. However, the recovery was limited, as she indicated that any changes would be to the political declaration rather than the Withdrawal Agreement. Even so, GBP has the best of the day, up around 0.4%.
The EUR also fell against the USD and the JPY, dragged by Brexit concerns and the fall of the Italian government as Conte announced his resignation, though the declines were seen well before the announcement.
USD/JPY moved lower through the morning, reversing Monday's gains, helped by lower US yields.
AUD/USD gave up some overnight gains, settling back in the middle of a 0.6750-0.68 range.
USD/CAD continued the firm tone seen on Monday, though without any obvious drivers. Oil prices were slightly firmer, though gains were reversed in the afternoon.

Asia FX and News:
-RBNZ Hawkesby said the Bank's big rate cut reduces the chance of QE
-Dublin refuses to engage with UK on plan for no-deal Brexit ~ Irish Times
-Market corrects some of the negative-risk move seen on Tues though news flow and data were light. JPY the main loser in Asia as US yields rebounded. USD/JPY rose above 106.50, paring most of Tues's losses. AUD/USD under modest bid tone on better risk, stronger yuan and secondary domestic data mildly supportive though sellers stepped up around 0.6790. USD/CAD dipped with oil gains weighing though the 200dma provided some support. AUD/NZD continues to drift higher.

Data:

AU: Westpac-MI Leading Index (Jul) 0.14% m/m (Prev: -0.07R)

AU: Internet Skilled Vacancies (Jul) 0.4% m/m (Prev: -0.2R)

Still To Be Released -

Data:

04:30 GMT - NL: Consumer Spending (Jun) % y/y (Prev: 2.4)

04:30 GMT - NL: Consumer Confidence (Aug) (Prev: 2)

05:30 GMT - JP: Tokyo Department Store (Jul) % y/y (Prev: -1.3)

06:00 GMT - NO: Unemployment (AKU/LFS) (sa) (Jun) % (Mkt: 3.4 Prev: 3.4)

08:30 GMT - UK: Public Finances (PSNCR) (Jul) GBP bn (Prev: 15.2)

08:30 GMT - UK: Public Borrowing (PSNB ex banks) (Jul) GBP bn (Mkt: -2.9 Prev: 7.2)

12:30 GMT - CA: CPI (Jul) 4cast: 0.2% m/m (Mkt: 0.2 Prev: -0.2)

12:30 GMT - CA: CPI (Jul) 4cast: 1.7% y/y (Mkt: 1.7 Prev: 2)

13:00 GMT - BE: BNB Consumer Confidence (Aug) (Mkt: -6 Prev: -6)

14:00 GMT - US: Existing Home Sales (Jul) 4cast: 5.4mn (Mkt: 5.4 Prev: 5.27)

Events and Auctions:

22:00 GMT - US: Fed's Quarles speaks in Salt Lake City

09:30 GMT - DE: New Bund 08/50 (EUR 2bln)

18:00 GMT - US: FOMC Minutes


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