The effect of the US midterm elections is already over now. We saw the quick USD dumping at the end of last week and another wave yesterday during the Asian session when the market realized that the Democrat Party won the US Congress as the first results started coming out. But, that second wave didn’t last long and the markets started settling down in the European session. We can see that the effect is over from the market sentiment; safe havens such as Gold and the JPY have been slipping lower, while risk assets are still advancing, albeit slowly.

Now, the attention of the markets has shifted towards the FOMC statement. The FED will release the statement in the evening today and traders are curious to see what the FED thinks about hiking interest rates again in December. Odds are that the FED will increase rates in December, which will be the fourth time this year, but it is not a done deal. So, today’s statement is expected to shed some light into that, hence the limbo in most financial markets today. We had the economic bulletin from the ECB today and some more Brexit related comments, but it was the usual stuff, nothing to move the markets.

The European Session

• China Keeps the Positive Attitude Approach – Trade balance was expected to decline to 209 billion this morning, but it increased to 234 billion. Trump must hate it, so the Chinese officials started making positive comments quickly saying that they hope to resolve trade disputes with the US via talks. President Xi Jinping said that the US should respect China’s legitimate interest while Prime Minister Li Keqiang added that China will keep economic growth within reasonable range. It seems that they are apologizing for the increase in the trade balance, but I don’t think we will see a solution soon.
• ECB Economic Bulletin – The European Central Bank released its economic bulletin which looked pretty optimistic to me, more than it should be. They see the economy in a broad-based expansion with consumption and the labour market expected to strengthen further. But, we have seen some weak figures from the Eurozone recently, especially from Italy, so the ECB might be a bit out of touch with the reality here. The European Commission cut growth forecasts for 2019 to 1.9% from 2.0% previously.
• UK Side of Brexit – A report at The Sun today suggested that Theresa May will fly to Brussels to ask the EU for more time to strike a deal with her cabinet members. UK Foreign Secretary Jeremy Hunt popped up a little later saying that he is confident that a solution will be found for the Irish border and the Brexit deal. But, we have heard this many times before. Just now, Reuters published a piece saying that the UK cabinet cannot hold a Brexit meeting before next week.
• EU Side of Brexit – EU’s Brexit negotiator Michel Barnier said in Helsinki this morning that the clock is ticking on Brexit. Then, a report came from the Austrian Der Standard suggesting that a deal could be reached within days. Positive words, but we have heard them before too.
• Irish Brexit Side – Ireland’s EU Commissioner Phil Hogan commented on Reuters that if we don’t get proposals from UK government on the Irish border in the next few days, then it is unlikely to have a Brexit deal in November. He added that the EU has made it clear that there is no change for the backstop. Irish PM Vadarkar popped up later saying that the UK departure should be orderly and not create a hard border in Ireland. Foreign Affairs Minister Coveney added that Ireland doesn’t have a hidden agenda for Northern Ireland and there will be no withdrawal agreement without a border backstop. So, no deal it is then.
• Italian Budget Deficit – According to Bloomberg, referring to an unnamed Italian official, Italy won’t change the budget plan for next year. EU’s Moscovici said later on that he expects the revised budget proposal from Italy, adding that the EU expects lower GDP growth for Italy and confrontation is not the best way. Shortly after him, Italian Finance Minister Giovanni Tria said that Italy won’t revise the budget.

The US Session

• US Jobless Claims – US unemployment claims came pretty much as expected this month at 214k, against 213k expected. That’s unchanged from last month as well.
• Canadian Housing Starts – Canadian housing starts climbed back above the 200k level today. They were expected to increase at 199k from 189k last month, but increased by 206k. The trend has turned bullish again for this indicator because it was falling for a few months.
• More on Brexit – There was a report on The Times just now saying that we might get the full withdrawal agreement from the UK by Tuesday. According to that, the UK cabinet will meet on Monday, then Raab will meet Barnier on Tuesday and then Theresa May will make the main speech on the Parliament. Well, let’s see.
• FOMC Statement – The FED is expected to keep interest rates unchanged today after hiking them in September. But, the statement will be interesting to watch because the market is expecting a rate hike in December and this statement might offer some insight of what the FED thinks about that.

Trades in Sight

Bullish GBP/USD

1. This pair is on a bullish run
2. The 20 SMA is providing support
3. The retrace is almost complete

The 20 SMA finally caught up

The 20 SMA (grey) finally caught up with the price in GBP/USD now and it provided support earlier today. GBP/USD bounced off of it and is 30 pips higher from the lows now after retracing lower since yesterday. But, the stochastic indicator is almost oversold now which means that the retrace lower is complete. Now, this pair is resuming the bullish trend.

In Conclusion

The financial markets are much quieter today and the sentiment is still positive, so if you are trading, keep the side of the risk assets and go against safe havens, but keep positions tight since we don’t expect much volatility today until the FOMC statement gets released in the evening.