Good morning,

AUD: Central bank holds

Last night the Reserve Bank of Australia left interest rates at 1.5%, giving way to some modest Aussie strength across the board. The accompanying commentary was in-line with previous months, highlighting soft inflation and the wider global downside risks. Governor Philip Lowe will be talking to the markets tomorrow, with analysts waiting to see if he will take another dovish turn. The current RBA policy has remained unchanged for three years.

Whilst inflation remains below the 2% target set by the RBA, it’s difficult to see any uptick in sentiment around rates, and there is already some pricing in of further rate cuts by April next year.

GBP: Data void

Following on from the Markit Services PMI miss yesterday morning, the Pound faces a lack of data today. Bank of England Governor Mark Carney is due to speak at 15:35 GMT, and the usual Brexit related economic pressures and “what ifs” will apply.

In general trading, the Pound has backed itself into a difficult spot. Following the wave of positivity and upbeat sentiment that ran through all of last week, we are now left waiting for updates. The Irish backstop negotiations are resuming today, and I imagine there will be plenty of late nights ahead for the ministers involved.

We have had several moments in the last 12 months where no news has been considered good news but, with fractional time left to play with, the lack of news is piling pressure back onto the Pound. GBPEUR has pulled back 1.1% and GBPUSD remains 1.5% lower from last week’s rally.

USD: Trade deal one step closer

The media is continuing to report on the positive progress being made between Trump and Xi Jinping and there is the belief that their next meeting (TBC) will conclude the trade and tariff deal.

New home sales and ISM non-manufacturing data are due out at 15:00. Whilst the service sector remains upbeat (57,2 vs 56.7 expected), there will be increased scrutiny into the housing market data.

CNY: National People’s Congress

Overnight, GDP targets were revised down from 6.5% to 6.0%, which would supplement the deceleration in current economic growth.

Significant tax relief has been promised to the industrial sector and further VAT cuts are planned. This would allude to the fact that China understands the current risks and is avoiding a crash landing -“Proactive, stronger, and more effective” fiscal policy is the name of their game.

Have a great day.