The US Commerce department expanded the trade blacklist of Chinese companies and also imposed visa restrictions on Chinese government officials. The Chinese Embassy issued a statement that the country “deplores and opposes” these actions. Not exactly a “warm and fuzzy” atmosphere ahead of trade talks tomorrow. Fed Chairman Jerome Powell said yesterday that US expansion “feels very sustainable” although it’s clear that things are slowing a bit. He added that “policy is not on a preset course”. He also said that the Fed will continue to be “data dependent”, assessing the economic outlook and risks to that outlook on a meeting-by-meeting basis. The Fed will be announcing measures to add to the supply of reserves over time. He stated that this adding to the balance sheet is “in no sense QE.”
EUR/USD has moved higher as traders cover EUR short positions. Technically speaking, a bearish sentiment remains for the single currency. News that the US-China talks may not go as well as the market expected is giving the EUR some support and with no Euro related news on the docket today, the EUR will trade off USD sentiment.
The UK Times is reporting that the EU may be conceding a bit on the Irish backstop. According to the newspaper, “Diplomatic sources said that European governments are prepared to concede a unilateral revocation of the withdrawal treaty, after a period of time.” The date of 2025 has been mentioned as long as both sides agree to it. The concession relates to the mechanism of the backstop, not to its existence and the offer may not fly with the UK government. Apparently, Irish Prime Minister Varadkar has rejected time limits on the backstop. GBP/USD rallied almost 100 points after the news release.
Traders removed some safe haven trades overnight but remain cautious ahead of the trade talks between the US and China. Short covering on oversold USD positions is being given as the reason for the weakness overnight in the Japanese Yen.
Canadian housing starts slowed in comparison to August but still beat expectations. September starts were 221,000 after an August number of 226,000. Market economists were expecting a 214,000 number. Building permits as well signaled strong demographics within the construction industry being created across Canada. Permits for September posted 6.1 percent increase after a previous number of 3 percent.
The US imposed visa restrictions on Chinese officials supposedly involved human rights violations. Trade talks begin Wednesday and now it is being reported that the Chinese delegation will cut short their visit. Threats of further tariffs from the US have been met by threats of retaliation by the Chinese and to add to that, China state media has accused the NBA commissioner of supporting earlier comments by Houston Rockets general manager Daryl Morey that support the anti-government protests in Hong Kong. China has suspended broadcasts of NBA preseason games in China. Moving forward this could be a huge problem for the NBA.