Asian and US stocks rise as trade optimism returns
US and Asian stocks rose in overnight trading after Donald Trump confirmed that he would meet China’s Liu He today. This is a day after Liu began talks with senior US officials like Robert Lighthizer and Steven Mnuchin. Traders interpreted this as a positive move regarding trade negotiations. While hopes for the meeting are low, traders hope that the two countries can at least do a skinny trade deal. On Wednesday, China announced that it had offered to make big farm purchases from the US as a sign of goodwill.
Sterling rose yesterday after Boris Johnson and Leo Varadkar met to deliberate on the next phase of Brexit. In a statement, the two leaders said that there was a possibility of a deal by the end of October. This was positive news at a time when most traders had almost given up on a deal between the EU and the UK. Varadkar will travel to Brussels tomorrow to meet with Michel Barnier and discuss the way forward. Northern Ireland has become the biggest issue on Brexit with the EU insisting that it will need to remain in the EU Customs Union.
Today, the focus among traders will be on Brexit and trade. From Europe, the market will receive the CP data from Germany, France, and Spain. In September, the German CPI is expected to have remained unchanged at 1.2%. The HICP is also expected to have remained unchanged at 0.9%. In France, the headline CPI is expected to have declined slightly to 0.9% from the previous 1.0%. In Spain, the headline CPI is expected to have remained unchanged at 0.1%. Many analysts expect that the EU could go through a recession later this year. The hope is that EU countries will start implementing fiscal stimulus. The US will release the export and import price index while Canada will release its employment data for September.
The GBP/USD pair jumped sharply to a high of 1.2465. This was the highest level since October 4. On the daily chart, this price is close to the 38.2% Fibonacci Retracement level. This price is above the 28-day and 14-day moving averages. The RSI moved sharply higher as well. Today, the pair’s movement will depend on the statement from Brussels where EU negotiators will meet with Ireland’s Prime Minister, Varadkar. The key points to watch will be yesterday’s low of 1.2195 and the 1.2500 support.
The EUR/USD pair rose slightly in the Asian session. The pair is trading at 1.1015, which is slightly lower than yesterday’s high of 1.1033. On the hourly chart, this price is above the Ichimoku cloud. It is also above the Tenkan Sen and the Kijun Sen. The pair could move to retest yesterday’s high. Alternatively, the pair could move back to the channel that was established this week. This channel is between 1.1000 and 1.0963.
The USD/JPY pair declined by a few pips during the Asian session. The pair is trading at 107.94, which is slightly lower than the day’s high of 108.12. This month, the pair has been on an upward trend, rising from a low of 106.45. On the hourly chart, the pair is above the 14-day and 28-day moving averages. The RSI has moved slightly higher and it remains below the overbought level of 70. The pair might continue moving higher. It will likely test September’s high of 108.45.