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From the Floor: Sterling at a crossroads, China in focus — #SaxoStrats

   • Fed chair speculation continues to animate USD trade
   • EURGBP trading up to interesting 0.90 level
   • Xi Jinping speech criticises housing speculation, points to economic risks
   • Industrial metals lower, copper 'needs to hold 3.16': Hansen
   • Spanish bonds in focus on rumours of Catalan declaration of independence
   • Chipmaker ASML disappoints on Q4 earnings, quant model negative

By Michael McKenna

Volatility remains low across global FX markets, reports Saxo Bank head of forex strategy John J Hardy, but one pair that appears to be primed for a move is EURGBP where sterling is weakening against the common currency.

"The 0.90 area is key for EURGBP," says Hardy, adding that a break of this levekl could lead to further weakness in GBP.

EURGBP currently trades at 0.8923.

The US dollar found a bid on speculation that president Trump currently favours the hawkish Stanford University economist John Taylor for Federal Reserve chair, with the latest reports stating that Trump intends to announce the replacement for current chair Janet Yellen ahead of his November 3 trip to China.


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Source: Saxo Bank 

From Beijing, the 19th Communist party Congress is now underway with Chinese president Xi Jinping out overnight with a three-hour speech that took aim at housing speculation and outlined short-term concerns over the Chinese economy.

The speech did little to sway the Chinese yuan, but Saxo Bank head of commodity strategy Ole Hansen says that it is currently weighing on industrial metals with high-grade copper moving down towards an interesting level.

"The 3.16 line needs to hold in copper," says Hansen, adding that a further move lower to 3.12 is possible if this level is breached.

Oil is maintaining its bid on Iraqi forces' determined retaking of Kurdish territory in the country's divided north, with Tuesday's API report, which showed a greater-than-expected inventories draw, providing support ahead of today's release from the Energy Information Administration.

Saxo's head of commodity strategy cautions, however, that last week's API data failed to match up with the EIA numbers across the board.

Finally, Saxo Bank head of fixed income strategy Simon Fasdal cautions traders to keep an eye on 10-year Spanish bonds on widespread rumours that Catalan authorities may be preparing a declaration of independence despite Madrid's moving in to declare the region's secession referendum illegitimate and arresting several alleged protest organisers.

For more on European bonds, gold, crude oil, US earnings and the upcoming Czech and Japanese elections, listen to today's Morning Call in its entirety via the above video link.

Into the European bell, Saxo Bank head of equity strategy Peter Garnry says that the German Dax index continues to surge while in single shares, chipmaker ASML disappointed with lower guidance while maintaining its fiscal year outlook.

All eyes are on Beijing for word from the 19th Party Congress. Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank


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