USD/CAD falls to five-day low after BOC survey

May in parliament

• There's been a great deal of inaccurate speculation about weekend's events
• Time of clear-eyed focus on few remaining critical issues
• Have made real progress on Northern Ireland
• Shape of a deal is now clear
• Creating any customs border is not acceptable
• Backstop is needed in case future setup not ready in time
• EU agreed to explore UK-wide backstop
• Cannot let Northern Ireland disagreement derail a possible Brexit deal
• Cannot run risk of Brexit limbo and be trapped
• Will expect UK-wide customs arrangement to end by Dec 2021
• Doesn't want to see backstop having to be used at all

Cable higher on the headlines.

Highlights of the Bank of Canada's Q3 2018 business outlook survey

• Prior future sales were +6%
• Widespread reports of better sales indicators for domestic and foreign customers
• Capacity pressure fell slightly but pressures remain elevated
• Labor shortage indicators point to tighter labor market, firms say shortages more intense
• Investment intentions rebound to high level
• All interviews conducted before USMCA trade deal
• Majority see strong US demand in coming year
• Firms expect input and output prices to grow at faster pace
• Full report

Survey data:

• Overall business outlook survey 2.8 vs 3.1 prior
• Investment intentions +33 vs +17 prior
• Hiring plans +39 vs +51 prior
• Capacity pressures +56 vs +57 prior
• Labor shortage +37 vs +34

Separately, the senior loan officer survey was at -10.9 from -8.9.

Overall, these are bullish headlines for the Canadian dollar. The BOC has been waiting for this kind of jump in investment. The critical deal is that this was before the NAFTA deal, so it's only going to improve.
ForexLive

Tether falls

Tether is a stable coin that's pegged at one-to-one with the US dollar. The problem is, there have been relentless rumors that the dollars backing it don't exist.

Today Tether fell as much as 5% and remains 2.5% lower. It's at 0.96372 which in theory means you could buy the Tether, convert it to US dollars and pocket a nearly 4% return. It's price continues to vary widely with some exchanges still at 0.92 cents and Kraken hitting 85-cents at the lows.

Some exchanges -- including Binance -- have suspended Tether withdrawals but it appears to be maintenance related, not a delisting.

The thinking behind the rally in crypto today is that holders of Tether are selling and buying other coins to avoid an implosion in it.

Of course, rumors of Tether's imminent demise are nothing new.
ForexLive

August 2018 US business inventories

• Prior was +0.6% (revised to +0.7%)
• Business sales +0.5% vs +0.2% prior
• Inventory-to-sales ratio 1.34 months vs 1.34 months prior

Comments from former Fed Chair Yellen

• Fed needs to move rates to neutral, stabilize the labor market
• I am worried about the economy overheating

Small decline to start the week

The S&P 500 is down 7 points to 2760 shortly after the open.

Canada well positioned to take advantage of trade war

The US and China will be trading less with each other and more with Canada, Mexico, South Korea and others in the months ahead.

Statistics Canada reports that from April to August the value of Canadian exports to China rose 23%.

From the Globe & Mail:

"Take wool: The industry's U.S. market has "basically evaporated on us this year," said Eric Bjergso, general manager of the Canadian Co-operative Wool Growers Ltd., which markets more than 90 per cent of Canadian wool. Chinese tariffs have largely rendered American wool uncompetitive, and, as a result, the United States is now flooded with local product. So Canadian wool is moving in far greater numbers to China − shipments of unprocessed greasy shorn wool to the United States have vanished in recent months, but soared nearly eight-fold to China this August relative to last year."

With US-China trading relations set for a long-term cooling, Canada and Mexico are particularly well placed to trade with both. It's a theme I've been talking and writing about for weeks:

Reuters sources

The Turkish press has been reporting there is audio of his murder. It's supposedly from an Apple Watch he was wearing but many believe the consulate was bugged and that's just a cover story.

Reuters cites two Turkish soldiers.

Am I the only one who is skeptical of everything surrounding this case? I mean, who has the most to gain here?

In any case, if there is audio and it's released. It's going to be explosive.

Existing home sales data from the Canadian Real Estate Association

• First decline since April
• Prior was +0.9%
• New listings +3.0%
• Home price index +2.3% y/y
• 5.3 months of inventory, in line with the long-term average

Trump to send Secretary of State to Saudi Arabia

Trump tweeted about Saudi Arabia, noting that the king denied any knowledge of what happened to Jamal Khashoggi.

Saudi markets were roiled on weekend threats from Trump to take strong action if Saudi Arabia is found responsible. WTI crude oil initially rose as high as $72.70 but that has faded to $71.84.

September 2018 US retail sales highlights

• Prior was +0.1% (unrevised)
• Ex autos -0.1% vs +0.4% exp
• Prior ex autos +0.3% (revised to +0.2%)
• Ex autos and gas 0.0% vs +0.4% exp
• Prior ex autos and gas +0.2% (revised to +0.1%)
• Control group +0.5% vs +0.4% exp
• Prior control group +0.1% (revised to 0.0%)
• Full report

The headline is poor but if you strip out autos, gas and building supplies it was a strong month. Autos rose 0.8%, building materials rose 0.1% and gasoline station sales fell 0.8%.

Boosts came from furniture (+1.1%) and electronics/appliances (+0.9%) while health and personal care stores (-0.3%) were a drag. The drop in spending at bars and restaurants was the largest in two years in a 1.8% decline but that may have reflected the impact of Hurricane Florence.

Control group:

NY state survey of manufacturers

GBP recovering

In other markets, the snapshot is showing:

Retail sales due at the bottom of the hour

The September retail sales report is due at 1230 GMT and expected to rise 0.6% m/m with the control group up 0.4%.

Here's what Barclays had to say:

"We expect retail sales to have risen 0.6% m/m in September, driven by strength in autos and core categories. Manufacturers' reports on auto sales showed a healthy rise in September sales, which should be reflected at the retail level as well. For sales excluding autos, we look for a more modest increase of 0.2% m/m. At the core level, we expect sales to be up 0.4% m/m."

KBC says the "question is whether solid US eco data will help to restore confidence on US/global equity markets. At least for now sentiment looks still fragile."

Forex news from the European trading session - 15 October 2018

Headlines:

• Brexit: British MPs reportedly trying to persuade May to ditch Chequers
• UK PM spokesman says still focused on getting a Brexit deal in the coming weeks
• Italian government 2019 budget approval reported to slip to Tuesday
• European Commission says it is intensifying contingency work for no-deal Brexit scenario
• Brexit: EU says that this week's summit may not produce Brexit breakthrough
• ECB's Rehn says latest core inflation data was somewhat disappointing
• Brexit: Coveney says backstop must not be time-limited as insurance for Ireland
• Is it about time to take this out of your back pocket?
• SNB total sight deposits w.e. 12 October CHF 577.6 bn vs CHF 577.5 bn prior
• Switzerland September PPI -0.2% vs +0.3% m/m expected
• Brexit: DUP says that no deal outcome is "probably inevitable"
• Understanding Italy's budget problem
• Has the S&P 500 narrowly escaped another potential downturn?
• RBA's Harper says economy is getting a tailwind from lower Australian dollar

Markets:

• CHF leads, USD lags on the day
• European equities mixed on the session
• US 10-year yields flat at 3.159%
• Gold up 0.93% to $1,229.21
• WTI up 0.70% to $71.84
• Bitcoin up 3.23% to $6,415
  
  

The major trading theme in markets from last week has carried forward to the new week as the session began with notable weakness across the equities space and that kept the yen and swissie bid as European trading began. USD/JPY started the session around 112.05 but moved lower to 111.80 as the yen gathered further bids with E-minis seen declining.

Although the general market tone was a little negative as equities continued to slip, the dollar once again failed to find any support as it dropped against the rest of the major bloc. As the session progressed, USD/JPY continued to fall as the yen extended its gains on the day. The pair touched a low of 111.63 with E-minis falling to a low of 0.8% on the session.

That resulted in further bids in the Swiss franc as well with USD/CHF starting the session around 0.9900 before falling to a low of 0.9848 on the day. As we close out the session, US equity futures are paring some of its earlier losses and with that the yen and swissie are also a little off their highs. USD/JPY now sits close to 111.90 while USD/CHF holds around 0.9860 ahead of US trading.

As the dollar failed to gather any momentum from haven bids, the euro, aussie, and kiwi took advantage of that as they pushed forward against the greenback on the day. EUR/USD started the session on the back foot around 1.1550 with the euro dragged lower from the pound's woes. But that quickly turned as risk sentiment started to sour and the pair rose to 1.1575 before tailing off to 1.1550 and then rising back up to test the 1.1600 handle again.

AUD/USD traded more straightforward with the pair starting around flat levels at 0.7110 before gradually advancing higher to reach 0.7144 before trading close to the highs now. NZD/USD saw similar price action as it started the day around 0.6500 before touching a high of 0.6540 where it trades close to now.

One of the notable movers on the day was the pound as cable traded around 1.3110 levels early on in the day, weighed down by the weekend rhetoric that Brexit talks have come to an impasse for the time being. But cable pared losses as the dollar surrendered all of its gains on the day moving back to 1.3150 levels, before pushing to a high of 1.3182 as the pound started fading some of the negative sentiment from Brexit talks.

The two points that stand out for me in trading today is firstly the lack of bids in the dollar again despite the softer risk sentiment and that is causing for a rethink in dollar sentiment in general. Overall, that points to more headwinds ahead for the greenback with the risks of the midterms looming as well. The second point is yet to take place but it is something to watch out for instead. And that is a potential downturn in the S&P 500 index. That will be a key thing to watch out for in markets this week so make sure you pay attention to that.

According to the parliament leader's office

Serious warnings said to be flying about if she doesn't

GBP/USD touches a high of 1.3082 on the day

Comments by UK PM spokesman James Slack

• Confident of getting a Brexit deal
• Have made real progress in Brexit talks
• There remains a number of unresolved issues relating to backstop
• Remains in continuous negotiation with the EU
• No proposals to extend implementation period
• Says that Theresa May is seeking to make a statement to parliament on Brexit
• Awaiting approval from parliament authorities to make that statement

Italy to miss out on the EU budget submission?

Comments by European Commission chief spokesman Margaritis Schinas

• Reiterates that no further discussions on Brexit will take place ahead of Wednesday
• Says that Barnier may brief the commission on Brexit some time this week
• Several key issues still unresolved on Brexit

According to unnamed EU diplomats, cited by Reuters

• Political endorsement lacking in UK on Irish backstop
• European leaders at summit must be united on Brexit

Comments by German government spokesman, Steffen Seibert

• Wants to avoid a no-deal Brexit scenario
• Says that a solution to the Irish border/backstop must be found quickly

The greenback crumbles against the major currencies bloc