01-NOV-2018, THURSDAY

1) Pound Eyes Carney Brexit Comments
2) Gold Prices May Keep Falling as ISM Data Lifts Fed Rate Hike Bets
3) AUD/USD Prices Aim Higher on Trade Balance Ahead of RBA Decision

1) Pound Eyes Carney Brexit Comments

The British Pound rose in Asia Pacific trade amid a burst of Brexit-related optimism. A Times report claimed that the UK and EU have reached a tentative deal on financial services. Separately, the FT reported that UK Brexit Secretary Dominic Raab expects to conclude a final accord by November 21.

The spotlight now turns to the Bank of England for the so-called “Super Thursday”. This amounts to a policy update, minutes from the latest meeting of the rate-setting MPC committee and a new quarterly Inflation Report (QIR), the main vehicle for communicating forward guidance. The markets’ response may ultimately hinge on what Governor Mark Carney says at a press conference following the release. No policy change is on offer and updated economic forecasts are likely to be made moot in short order by the approaching Brexit deadline, now just five months away.

Specifically, traders will want to hear just how much economic pain the central bank expects in the event of a “no-deal” outcome. A fire-and-brimstone take from Mr Carney may weigh on Sterling, pushing it back from intraday highs while more tranquil rhetoric could give the currency a further lift.

2) Gold Prices May Keep Falling as ISM Data Lifts Fed Rate Hike Bets

Gold prices continued to fall as recovering risk appetite sent Treasury bond yields higher alongside stocks while the 2019 rate hike outlook implied in Fed Funds futures steepened. That understandably undermined the appeal of non-interest-bearing assets. Looking ahead, October’s US manufacturing ISM survey is on tap. A slight slowdown in overall sector activity is expected but the main take away from the release might be a dramatic jump in costs growth. Forecasts are calling for the largest rise since March after four consecutive months of deceleration.

Gold prices are retreating from resistance in the 1235.24-41.64 area, as expected. A daily close below initial support in the 1211.05-14.30 zone exposes the 1180.86-87.83 region. Alternatively, a sustained recovery above 1241.64 sees the next upside threshold in the 1260.80-66.44 region.

3) AUD/USD Prices Aim Higher on Trade Balance Ahead of RBA Decision

The Australian Dollar strengthened against its US namesake after local trade balance data crossed the wires early into Thursday’s Asia Pacific trading session. September’s trade balance clocked in at A$3017m, beating both economists’ forecasts of A$1700m and August’s A$1604m. The third quarter’s export price index similarly outperformed at 3.7%, compared to the estimate of 2.2% and the 1.9% previous. Meanwhile, the 3Q import price index was 1.9%, with expected 1.0% and 2Q’s 3.2%. The uptick in trade figures may continue, as President Trump recently alluded to a “great deal” with China on trade that caused the Aussie to briefly soar.

Looking past the jump in prices, AUD/USD has remained in a dominant downtrend channel for the majority of this year due to interest rate differentials and global risk aversion. The currency pair recently carved a new 2018 low of 0.7021 and is now facing resistance at levels that formerly served as support. An invalidation of the descending trend line and reversal of these levels back to support may indicate a bearish reversal to come.

Looking ahead, the sentiment-linked unit will continue to closely eye risk trends. Continued broad-based market aversion and losses in global equities may mean further losses in the long-run for the Aussie. In addition, AUD/USD will also be closely eyeing the releases of US employment and manufacturing data, as well as the Reserve Bank of Australia’s cash rate target at their November 6th meeting.