Possibility of another rate cut?


According to NY Fed President Williams, the recent rate cut will “appropriately” address risks from trade uncertainty, global slowdown, and low inflation. However, recent disappointing trade data seems to reject Williams’ comments, fueling the possibility of a further rate cut when the FOMC meets later this month. 


USD weakness over the last few days continues against the EUR, as the single currency moves towards yearly high levels. Euro traders seem happy to follow the GBP and keep pressure on the USD. Poor US data released during the week is also putting pressure on the greenback. A US trade representative stated that tariffs of 10% and 25% will take effect today. These tariffs on EU goods include aircraft and agricultural products.


Brexit remains in the spotlight this morning, as an agreement has been made between the EU and the UK. The challenge now is for British Prime Minister Boris Johnson to sell the UK Parliament on the deal and get them to vote for it. Following the deal announcement, the GBP/USD moved higher. However, Parliament are not entirely happy with the agreement, with many Members of Parliament voicing their disapproval. The House of Commons meets on Saturday to vote on the deal and based on these comments, it may not pass. One MP stated this deal was “worse than any of the three former PM Theresa May brought to Parliament”. There are four scenarios facing us on Saturday. Parliament could approve the deal, reject it and call for elections, support the deal and add a conditional referendum, or reject the deal completely and request an extension that the EU has said they would not want. Suffice to say, GBP/USD could continue to trade with extreme volatility as comments regarding the deal will be reported today. 


Japan’s inflation data for September was released as headline CPI came in at 0.2% year on year, which was the number that was expected. Analysts are still expecting the Bank of Japan to renew easing steps when they meet later this month. Investors have headed to JPY in the build up to the Brexit vote as the possibility of safe haven purchases comes back into the picture.


The Canadian dollar moved higher after data released showed that manufacturing sales rose 0.8% to C$57.5 billion in August, beating the expected number of 0.7%. This improvement followed two consecutive months of declines. Sales were higher in 11 of 21 manufacturing industries, which represented 62.9% of the total manufacturing sector. Adding to the C$ strength was a report that jobs increased by 28,200 between August and September.


China released the Gross Domestic Product for the third quarter and the numbers were disappointing. China’s growth rate slowed to 6.0% year on year, in the third quarter down from 6.2% in the second quarter, and missed the expected number of 6.1%. This number is the worst release since 1992. The weak data has raised concerns that the economic slowdown in China could be worse than expected, as the trade war continues to weigh on the Chinese economy. 

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