· Risk-sensitive currencies such as the Aussie and yuan rallied on Thursday as investors cheered the announcement of U.S.-China trade talks for next month and abandoned safe haven assets such as yen.
The Australian and New Zealand dollars, Chinese yuan and South Korean won all jumped against the dollar, while the yen fell nearly 0.4% to 106.75 per dollar, its cheapest in more than three weeks.
The early-October talks will be held in Washington, China’s commerce ministry announced, following a phone call between China’s Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.
The news followed optimism that a no-deal Brexit could be avoided, which sent the pound sharply higher, and a potential breakthrough for the Hong Kong political crisis.
Those political developments, seen as positive for investment, also fueled a jump in Asian equities and bond yields.
· The Australian dollar rose to a one-month high of $0.6825, seen as a technical resistance level while the New Zealand dollar hit a one-week peak of $0.6377. The trade-exposed won climbed the most of Asia’s currencies to 1198.00 per dollar.
Against a basket of currencies, the dollar lifted a little from a one-week low to 98.492.
The Canadian dollar spiked sharply to C$1.3344 per dollar after the Bank of Canada left interest rates on hold and sounded less dovish than the market had expected.
The pound sat around $1.2245 and euro at $1.1030, holding overnight gains.
· The United States hopes to see a decision from the WTO in the next week or two about the level of tariffs Washington may impose after winning a case about European subsidies to Airbus, the U.S. ambassador to Brussels said Wednesday.
Ambassador Gordon Sondland said the two sides could still reach an agreement to settle a pair of 15-year-old legal cases over subsidies for aircraft development, but Washington hoped to recover damages caused to U.S. industry by the illegal EU launch aid for Airbus.
· German industrial orders fell more than expected in July on weak demand from abroad, data showed on Thursday, suggesting that struggling manufacturers could tip Europe’s biggest economy into a recession in the third quarter.
Contracts for ‘Made in Germany’ goods were down 2.7% from the previous month, driven by a big drop in bookings from non-euro zone countries, the economy ministry said. That undershot a Reuters consensus forecast for a 1.5% drop.
· U.K. Prime Minister Boris Johnson has not had the best week with parliament defeating his Brexit plans.
First, by taking control of the parliamentary agenda, then by passing legislation to prevent a no-deal Brexit – effectively forcing the prime minister’s hand when it comes to Brexit – and finally, on Wednesday night, scuppering his plan for a snap election – for now.
After taking control of parliamentary business on Tuesday, a majority of MPs then on Wednesday approved a bill forcing the prime minister to ask the European Union (EU) for another delay to the U.K.’s departure date, pushing Brexit back to January 31, 2020, if there is no withdrawal agreement approved by October 19.
The House of Lords, the upper chamber of the U.K.’s Houses of Parliament, has said it would approve the legislation, allaying fears that pro-Brexit peers could try to derail the bill. The bill is likely to receive royal assent — required for it to become law, before parliament is suspended next week.
“Johnson has lost control,” Chris Scicluna and Emily Nicol, economists at Daiwa Capital Markets, said Wednesday.
“After a mere two days of parliamentary scrutiny as Prime Minister, Johnson has already lost control of the House of Commons, the Brexit process, and the fate of his government,” they said in a note.
· China’s exports likely rose slightly in August as shippers raced to beat new U.S. tariffs but imports contracted for a fourth straight month, a Reuters poll showed, pointing to further strains on the economy as the Sino-U.S. trade war intensifies.
China’s August exports are expected to have grown 2% from a year earlier, according to the median estimate of 28 economists in the poll, slowing from a 3.3% rise in July.
China’s imports in August likely contracted 6% from a year earlier, worsening slightly from a 5.6% decline in the preceding month, the poll showed. Sluggish domestic demand was likely the main factor in the decline, along with softening global commodity prices.
· Hong Kong leader Carrie Lam said her decision to scrap extradition legislation was only the “first step” to addressing the city’s unrest, after protesters said the chief executive’s concessions fell short of their demands.
· Oil prices eased on Thursday after a report showed U.S. crude inventories rose against expectations, even as Washington and Beijing confirmed they would hold ministerial level talks to try resolve a prolonged trade war.
In a choppy trading session, Brent crude was down 17 cents, or 0.3%, at $60.53 a barrel by 0639 GMT, while West Texas Intermediate (WTI) was down 25 cents, or 0.4%, at $56.01 a barrel.
Reference: Reuters, CNBC, FX Street
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