FX Markets Start the Week Quietly

Market Reviews

The forex markets remain rather quiet at the beginning of the week. US dollar and British pound are steady. On the other hand, New Zealand dollar and Australian dollar are trading lower. The Chinese yuan also rose slightly against the dollar, helped by growing hopes that trade tensions between China and the United States would ease.

On stock markets, Nikkei closed down 1.57% at 21895.22. Hong Kong HSI lost 2.35%, Shanghai SSE dropped 0.98%, Singapore Strait Times fell 1.81%.

China’s President Xi Jinping stated, that China will reduce import tariffs and continue to expand market access. He also promised to speed up the opening of the education, telecommunications and cultural sectors, while protecting the interests of foreign companies and increasing the penalties for violations of intellectual property rights.

China Caixin PMI services dropped to 50.8 in October, down from 53.1 and missed expectation of 52.9. That’s the lowest level in 13 months. PMI composite output index dropped from 51.2 to 50.5, hitting a 28-month low, lowest since June 2016.

Bank of Japan Governor Haruhiko Kuroda said that the Central Bank knows that a long-term ultra-soft monetary policy can squeeze the margin of financial institutions and potentially destabilize the country's banking system. However, given the moderate inflation and uncertainty surrounding the foreign economy, he said that the Bank of Japan should maintain its large-scale incentive program, closely following the advantages and disadvantages of its policies.

Separately, BoJ also released minutes of September 18-19 monetary policy meeting. The minutes reiterated that the measures taken back in July, including introduction of forward guidance, were for strengthening the framework for “continuous” powerful monetary easing.

Brexit negotiations, Italy budget, US-China trade talk, and US mid-term election will be in focus this week. Italy’s budget will be a hot topic in the summit of Eurozone finance minister meeting in Brussels today. Also, three central banks will meet this week. RBA, RBNZ and Fed are all expected to keep monetary policies unchanged.