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It was the 'Columbus Day' holiday, in the US and markets were extremely quiet. Markets continued to pore over the 'Stage One US/China Trade Deal' and recognise the weaknesses and vulnerabilities. There is a lot of detail to be confirmed and it appears that the need to announce the 'Deal' may have overwhelmed the finalisation of detail? It is, nevertheless, a deal after an extremely disruptive and extended trade war. It allows markets to gain confidence as supply chains and markets are restored. US Bond Yields continued to climb and support the Dollar, with the Yen trading 108.35, while contraction of EU Industrial Production, did little to support the EURO (1.1035). Positive Brexit developments has sparked a surge in the GBP, trading 1.2580, while any deal must be completed by the 31st of October?
Commodity currencies gained some ground, with the US/China trade deal, although confidence in the agreement is being doubted. The massive increase in US agricultural imports, as part of the deal, could pose serious competitive threats to agriculture exporting nations. Chinese trade data also undermined any gains, with an 8.5% contraction in Imports and a fall of 3.2% in exports. The NZD fell back below 0.6300, while the AUD drifted back to 0.6775, ahead of the release of the RBA minutes today.
Markets will roar back after the US holiday, as markets speculate over the integrity of the US/China trade deal and the Brexit deal possibilities.