Wednesday's session saw US Treasury Secretary Mnuchin out with a slight softening of a Trump administration's China stance, particularly around inbound investments, but the day ended in a determinedly risk-off mode with the dollar stronger across the board.
"The USD posted a strong day and we saw NZDUSD track lower in the wake of the latest dovish Reserve Bank of New Zealand outing," says Saxo Head of FX Strategy John Hardy, who adds that USDJPY is failing to follow its normal risk-off tack lower on both the USD surge and potentially on rising oil prices weighing on Japan's energy-importing economy.
"Today we see the European Union summit begin, and the focus appears to be on migration as German chancellor Merkel appears to have made something of a breakthrough, earning the support of Greece's Alexis Tsipras," says Hardy.
Saxo's FX chief notes that EURUSD is looking soft into the event on dollar strength but also perhaps some lingering EU existential doubt.
"All eyes remain on China," reports Saxo Bank Head of Equity Strategy Peter Garnry, who points to the Chinese CSI 300 index dipping below 3,400 to test long-term support.
"A Chinese think tank paper that was apparently released accidentally showed great concern coming from Beijing [on the state of the country's markets]," says Garnry, who notes that emerging market bonds and equities continue to be among the worst-performing assets in global markets.
Saxo Bank Head of Commodity Strategy Ole Hansen reports that trade war fears alongside broader concerns of a Chinese slowdown have copper prices challenged in a double-bottom formation around $2.94/lb while the recent oil rally that was driven by Iranian supply fears has paused after two days of price rise.
Finally, Hansen says, gold remains under pressure from increased short-selling amidst the strong dollar trend with the technical picture continuing to look bearish.
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.