FX Overnight Markets:

A flurry of trade war headlines moved risk sentiment and lead FX moves. Investors sought safety as an SCMP source story released early doors suggested no progress in dep-lvl U.S.-China trade talks, noting that Chinese reps may cut short their stay in DC. Reaction moves unwound somewhat, with CNBC & Fox reporters now sending conflicting signals. Risk appetite truly reared its head as a stronger than exp. PBoC fix was promptly followed by reported potential for a U.S.-China FX deal (BBG) & for U.S. firms being allowed to resume supplies to Huawei (NYT). Revived enthusiasm cooled somewhat as an FT piece noted that the U.S.considers measures to curb China contraband.

Safe haven FX ended up on the defensive, with USD losing most ground among the G10. The Antipodeans outperformed their G10 peers. The yuan showed sensitivity to trade war headlines, with USD/CNH printing new monthly peak & trough.

All around the world, fund managers appear to be gearing up for an era of low inflation. Unless, that is,they are investing in the UK. The UK’s predicament is partly because of uncertainty over Brexit, as well as a reflection of the unique needs of the country’s pension fund sector.

FX Related Economic News:

The calendar picks up pace Thursday, as industrial production for France is published at 0745BST. In the UK the release of the short-term monthly indicators will be watched at 0930 BST, while the publication of September inflation data at 1330 BST is the highlight in the US.

Deal or No Deal - U.S.-China Trade Talks:

Investors are bracing for a decade of high inflation:

FX Relative Volatility:

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