Asia markets were stifled by a wipe of holiday markets across Australia, China, and Hong Kong, leaving early markets with thin volume. Trade talks between the US and Canada continued around the clock over the weekend, and a last-minute framework of an agreement has been reached by both countries, and US President Donald Trump is set to sign the new trilateral trade agreement, now called USMCA, by the end of November.
Italy is dominating EU-centric headlines for the time being after the Italian government decided to snub EU deficit limits, and traders will be keeping an eye out for continued shakeout from Italian politicians, with the early part of the week set with a hectic but minimally-impactful economic calendar.
USD/JPY reached a 13-month high of 113.96 in Asia, but the oversold JPY could catch a bid wave if Italian fiscal concerns weigh on the European equities. On the other hand, the JPY selling may continue, yielding a convincing break above 114.00 in USD/JPY if the European equities report gains. In the US session, the pair may also take cues from the US ISM non-manufacturing release. The growing divergence between the Fed and the BOJ indicates the path of least resistance is to the higher side.
Brexit headlines continued to cross the wires over the weekend and into the new trading week, but little momentum is seen on trade talks between the UK’s Prime Minister Theresa May and European Union leaders in Brussels, as a result uncertainty that the UK may face a hard Brexit after all are back on the rise.
Brent crude oil prices rose to their highest – $83.27 a barrel, since November 2014 on Monday ahead of U.S. sanctions against Iran, the third-largest producer in OPEC, that kick in next month. U.S. crude futures were up 32 cents, supported by a report on Friday of a stagnant rig count in the United States, which points to a slowdown in U.S. crude production, which now rivals top producers Russia and Saudi Arabia.
Gold slips as the US Dollar firmed on hawkish Fed, saying it planned four more increases by the end of 2019 and another in 2020, amid steady economic growth and a strong job market. Higher U.S. interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices.