News & analysis


The loonie is trading on the back foot across the G10 this morning as oil steadied after its biggest weekly gain since June amid mixed headlines. Libya moved one step closer to reopening its battered oil industry after the state energy firm reported it would resume exports from fields and ports that are free of foreign mercenaries. Saudi Arabia showed its determination to protect the global oil demand recovery, and dropped clear hints during last week’s OPEC+ meeting that there could be a change in production policy before the next meeting in December as the nation is prepared for new output cuts. The US said on Saturday that all of the UN resolutions on Tehran in place before the 2015 deal are back into effect, but the G3 (Germany, France and the UK) warned in a statement that the US’ claim to have the authority to reimpose sweeping UN-mandated sanctions on Iran has no effect in law. The US presidential elections may have a tremendous impact on global oil markets as a Biden White House may return to the negotiating table with Tehran. For today, all eyes are turned to Bloomberg’s Nanos Confidence reading today at 13:00 BST.


The greenback has started this week’s session in the red against the whole G10 currency board as the US coronavirus death toll approached 200,000 over the weekend and the new daily infections rose in line with the one-week average. According to the former FDA Commissioner Scott Gottlieb, the US will experience “at least one more cycle” of the virus in fall and winter. While this raises concerns domestically, global risk sentiment arguably had a better starting point this week with no further escalations in US-Sino tensions over the weekend. President Donald Trump told reporters on Saturday that he has approved Oracle’s bid for the US operations of TikTok “in concept”. The imminent download ban of the video app, which would take effect at midnight, has therefore been postponed until September 27. The deal now awaits Beijing’s sign-off, for which a maximum of a week will be considered. Although today’s calendar is mostly blank for the entire G20, the US releases one datapoint of note at 13:30 BST which is the Chicago Fed National Activity Index. The figure is designed to gauge overall economic activity and is set to have risen to 1.19 in August from July’s 1.18. Later this week, Federal Reserve Chairman Jerome Powell will testify to Congress on Wednesday and Thursday with respect to its latest monetary policy announcements. Powell will undoubtedly receive questions about the effectiveness of average inflation targeting, which he announced during the Jackson Hole speech, and if the Fed has any tools left in case of another lockdown. Any signals that the Fed may be out of ammo could weigh on both the dollar and general global risk sentiment.


The euro started the week on the front foot against the dollar, though this is more a case of dollar weakness than euro strength. Across the G10 space, the euro is trading with no clear direction this morning. The European Central Bank launched a review of its €1.35tn Pandemic Emergency Purchase Programme (PEPP) to consider how long it should continue the programme and whether the ECB should transfer the PEPP’s flexibility to older asset-purchase schemes. The reports were brought to the Financial Times by two governing council members on condition of anonymity. ECB President Christine Lagarde will speak at an online meeting of the Franco-German Parliamentary Assembly this afternoon at 13:45 BST, where she may comment on the headline. In terms of virus cases, the Netherlands reported record surges over the weekend while France saw infections increase to peak levels last seen in April. With France’s Finance Minister Bruno Le Maire testing positive for the virus and infections running at the fastest pace since the start of the outbreak, the country’s policy to avoid another lockdown may be under strain. In the Netherlands, increased containment measures such as earlier closing times for bars have been put in effect over the weekend. With today’s economic calendar being virtually blank for the eurozone, all eyes are turned to September’s Purchasing Managers’ Index released on Wednesday and Germany’s IFO survey on Thursday.


Sterling is trading in the green against all of its G10 peers except the Australian dollar this morning in the absence of major Brexit headlines, while Bloomberg reported an emergency UK cabinet meeting to discuss potential increases in restrictions as the UK saw more than 8,000 new infections over the weekend. Former government advisor Neil Ferguson told the BBC on Saturday that Johnson’s government needs to resume some nationwide measures soon to prevent a new surge leading to more deaths, while London Mayor Sadiq Khan sounded concerned on Friday as well, saying it is increasingly likely that “additional measures will soon be required”. The government said those who break rules may be fined as much as 10,000 pounds. After the mention of negative rates during last week’s Bank of England meeting, Andrew Bailey will speak at the British Chambers of Commerce’s online conference tomorrow, where any comments on the potential negative rates will be eyed. Looking forward, today’s light data calendar turns the focus to Wednesday’s Purchasing Managers’ Indices for September.

FX Elsewhere

The Australian dollar is the best-performing G10 currency this morning as the country’s worst virus-hit state, Victoria, is showing signs of recovery, with daily cases falling to a 3-month low of 11. Prime minister Scott Morrison struck an optimistic note on the recovery of the domestic labour market and stated that he expected jobs to bounce back up as the state prepares for the easing of measures. In New Zealand, the cabinet has confirmed that gathering limits in Auckland will ease on Wednesday while in the rest of the country, they will be lifted today. Prime Minister Jacinda Ardern stated there have been no new cases in Auckland for a week, but “there is still a need in Auckland for a cautious approach”. The kiwi dollar has not seen a rally like in AUD, but the New Zealand dollar may still enjoy a boost on Wednesday’s RBNZ rate decision following upbeat growth data from the past weeks.



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