Market Roundup
• Canada rejoins talks to stay in NAFTA, deal possible this week.
• Trump's U.S.-Mexico trade deal meets bipartisan skeptics in Congress.
• US Aug consumer confidence, 133.4, 127.4 previous, 126.7 forecast, 127.9 revised.
• US Jul Adv Goods Trade Balance, -72.20B, -67.92B previous.
• US 25 Aug w/e Redbook m/m, 0.4%, 0.2% previous.
• US 25 Aug w/e Redbook y/y, 5.1%, 4.7% previous.
• White House investigating Google after Trump accuses it of bias .
• U.S. military hints could resume major exercises on Korean peninsula.
• Global c.banks could sell 100 bln pounds from reserves in case of hard Brexit – BAML.
• Talk of no-deal Brexit is "a negotiating position" - Irish minister.
Looking Ahead - Economic Data (GMT)
• 01:00 Australia Oct HIA New Home Sales m/m, -6.1% previous
• 05:00 Japan Aug Consumer Confidence Index, 43.5 previous
Looking Ahead - Events, Other Releases (GMT)
• N/A French Finance Minister Bruno Le Maire and German Finance Minister Olaf Scholz speak at the annual summer conference of MEDEF employers' association in Paris
• 01:30 Bank of Japan board member Hitoshi Suzuki delivers a speech in Naha, southern Japan, and holds a news conference in Tokyo
• 07:00 Riksbank executive board meeting in Stockholm
Currency Summaries
EUR/USD is likely to find support at 1.1629 levels and currently trading at 1.1695 levels. The pair has made session high at 1.1730 and hit lows at 1.1688 levels. The euro was little-changed against dollar on Tuesday as investor optimism that a U.S.-Mexico deal will help avert a global trade war boosted appetite for riskier assets. The United States and Mexico agreed on Monday to overhaul NAFTA, putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-country pact. Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar. Both currencies gained against the U.S. dollar on Monday, but the peso weakened on Tuesday. Trade disputes have weighed on investor sentiment for much of 2018, despite solid economic fundamentals and robust corporate earnings. Many remain cautious. The dollar was down 0.2 percent against a basket of rival currencies at 94.637, after earlier hitting a four-week trough. The dollar last Friday and Monday was stung as well by comments from Federal Reserve Chairman Jerome Powell at the Jackson Hole, Wyoming conference that seemed to suggest a slower pace of U.S. interest rate increases. U.S. economic data could determine the dollar's further moves. The latest estimates for second-quarter U.S. gross domestic product are expected on Wednesday.
GBP/USD is supported in the range of 1.2800 levels and currently trading at 1.2868 levels. It reached session high at 1.2930 and dropped to session low at 1.2859 levels. Britain's pound declined against the dollar on Tuesday after British Prime Minister Theresa May played down the consequences of Britain leaving the European Union next year without securing a deal with the bloc. Failing to reach an agreement on trade relations with the EU "wouldn't be the end of the world," May told reporters as she headed to Africa to try to boost Britain's trade ties ahead of Brexit in March 2019. May's comments - seen as undermining Finance Minister Philip Hammond's warnings about the economic damage from a "no-deal" Brexit - piled pressure on the pound. The prospect of a no-deal Brexit is becoming increasingly feasible in the eyes of investors who are hedging against the risk of the currency tanking if Britain is left isolated from the EU, its largest trading partner. Britain's Brexit minister Dominic Raab last week said that London could meet an informal October deadline to agree a deal, but EU leaders expect to miss the deadline and are likely to have to hold an emergency summit in November. Market analysts say that most investors have already priced in a delay beyond October.
USD/CAD is supported at 1.2855 levels and is trading at 1.2931 levels. It has made session high at 1.3062 and lows at 1.2884 levels. The Canadian dollar strengthened to a nearly three-month high against its U.S. counterpart on Tuesday on the prospect of Canada reaching a deal this week to overhaul the North American Free Trade Agreement. U.S. Treasury Secretary Steve Mnuchin said he believed the United States can reach a trade deal with Canada this week after coming to an agreement with Mexico. Canada sends about 75 percent of its exports to the United States so its economy could benefit if talks with the United States and Mexico lead to a trilateral trade deal. Canadian Foreign Minister Chrystia Freeland will travel to Washington on Tuesday to continue negotiations. A spokesman for Freeland said on Monday that Canada would only sign a new agreement that is good for the country. The price of oil, one of Canada's major exports, rose towards its highest since early July, on evidence of still-modest increases in output from OPEC and improving Chinese refinery demand. The Canadian dollar was trading 0.4 percent higher at C$1.2929 to the greenback. The currency touched its strongest since June 6 at C$1.2883.
AUD/USD is supported around 0.7305 levels and currently trading at 0.7339 levels. It hit session high at 0.7361 and made session lows at 0.7335 levels. The Australian dollar held gains against its U.S. counterpart on Tuesday as a breakthrough in U.S.-Mexico trade talks removed one potential risk to the global outlook, though there was no progress of note with China.The Aussie dollar stood at $0.7337, well above last week's trough of $0.7238. A breach of chart resistance at $0.7333 improved the technical outlook but a tougher barrier lies at a former rally top at $0.7381. The United States and Mexico agreed a trade deal on Monday in what is essentially a re-branding of the North American Free Trade Agreement. Canada's trade minister will be in Washington Tuesday for their own talks. U.S. Trade Representative Robert Lighthizer said on Monday that Mexico had agreed to eliminate the chapter 19, something that Canada has strongly resisted. Trump has threatened he still could put tariffs on Canadian-made cars if Canada did not join its neighbors and warned he expected concessions on Canada's dairy protections. If a deal is not reached with Canada, Mnuchin said on Tuesday, the United States would proceed with a separate trade agreement with Mexico.
Equities Recap
European shares hit a two-week high after the United States and Mexico reached a trade agreement, though they gave back gains during the day to end flat, while autos stocks enjoyed a relief rally.
UK's benchmark FTSE 100 closed up by 0.8 percent, the pan-European FTSEurofirst 300 ended the day up by 0.10 percent, Germany's Dax ended up by 0.1 percent, France’s CAC finished the day up by 0.4 percent.
The S&P 500 and the Nasdaq edged up to record closing highs for the third consecutive session as investors struggled over whether to take profits following a rally on positive developments in trade disputes which have vexed the markets for much of the year.
Dow Jones closed up by 0.06 percent, S&P 500 ended up by 0.03 percent, Nasdaq finished the day up by 0.15 percent.
Treasuries Recap
U.S. Treasury yields on Tuesday rose across maturities to weekly highs as fears of a global trade war abated a day after the United States and Mexico agreed on an overhaul of the North America Free Trade Agreement, and following fair demand at auction for $37 billion of five-year notes.
The yield on the U.S. benchmark 10-year Treasury note was last up 3.5 basis points at 2.886 percent, after also rising 2.9 basis points on Monday's trade news. The 30-year bond yield \rose 3.5 basis points to 3.034 percent, after rising 2.8 basis points Monday.
The short end of the curve moved less, with the two-year note yield up less than a basis point. This steepened the yield curve, with the spread between two- and 10-year yields 2.5 basis points wider at 21.5 basis points and the spread between the five- and 30-year yields also up modestly, last at 25.8 basis points.
Commodities Recap
Gold turned negative on Tuesday as U.S. Treasuries rose after the United States and Mexico struck a trade deal, with analysts saying ongoing U.S.-China tensions would continue to weigh.
Spot gold lost 0.4 percent to $1,206.39 per ounce by 1:38 p.m. EDT (1738 GMT), earlier touching $1,214.28, its highest level since Aug. 10.
U.S. gold futures for December delivery settled down $1.60, or 0.1 percent, at $1,214.40 per ounce.
Oil prices fell on Tuesday as some investors took profits on recent strong gains, but losses were limited the day after a U.S.-Mexico trade agreement eased worries about tensions between the two countries.
Brent crude futures fell 26 cents to settle at $75.95 a barrel. The global benchmark touched $76.97 early in the session, the highest since July 11.U.S. West Texas Intermediate (WTI) crude futures fell 34 cents to settle at $68.53 a barrel.
