Risk is taking a bit of a knock as US and China tensions flare up again – this time over the Hong Kong issue as China threatens retaliation after the US passed a bill in support of Hong Kong protesters overnight.
China threatening retaliation against the US bill on HK has seen risk trades turn lower with the yen and leading gains in the currencies space.
Meanwhile, the pound is also holding lower as Brexit negotiations look set to continue in Brussels today before the European Council summit begins tomorrow.
The euro has moved higher with EUR/USD rising from 1.1030 levels to 1.1060, as Germany may drop balanced budget goal if economic downturn deepens.
US futures are down by 0.3% while Treasury yields are also lower across the curve, hinting at more cautious/defensive risk tones to begin the day.
Looking ahead, it will once again be a day dominated by the ebb and flow for the most part with headline risk set to remain the key driver in markets.
In the European session, UK September CPI figures at 08:30 GMT and Eurozone September final CPI figures at 09:00 GMT could offer intermediate direction to the market.
Wednesday’s US economic docket highlights the release of monthly retail sales data for September, which will influence the USD price dynamics later during the early North-American session. This coupled with the broader market risk sentiment might further contribute towards producing some short-term trading opportunities.
Oil prices rose on Wednesday, tracking gains in equities, as investors pinned hopes on a potential Brexit deal between Britain and the European Union and on signals from OPEC and its allies that further supply curbs could be possible.
Gold prices edged up on Wednesday as traders digested the latest news on Brexit and the Sino-U.S. trade front.