Memories of the dovish FOMC linger along with the thoughts that weaker US dollar concessions could be tied to any trade deal, so the Dollar bulls remain pretty much tethered to a dovish FOMC and possible trade deal concession.
There has been a sharp pickup in GBPUSD downside option buying for early October.
Let me preface my response by suggesting the risk-reward favours being tactically long GBP for a positive surprise, but I expect a bulk of flows to continue to hedge for worst case scenarios.
We expect a Sterling donnybrook to unfold over the potential elections /votes before the Oct 31 Brexit deadline. Spot GBPUSD moved sharply lower on increased elections headline risk. But with the US dollar going through some nasty death throes, the dive was repelled quickly despite Boris Johnson 's life now thrust into the tabloid spotlight.
Gold is still in vogue.
Gold markets love uncertainty, and with more than enough of that to go around with G-20 looming and Middle East headline risk simmering Gold remains in vogue. But after this morning flurry of activity that ran into plenty of sellers above $1410, demand has waffled touch. But as a significant rotation out of USD intensifies, it could open the door to a test of $1,1425 as Gold continues to attract a whole host of cross-asset buying above $1400
Oil markets still trading bid but.
The market is on stuck in headline watch mode but is holding a bid in case an aggressive Iran response to US sanction triggers one of those Arleigh Burke class of guided missile destroyers stationed in the Gulf to unleash a reign of Tomahawk terror and send Oil prices spiking higher. While not our base case scenario, the risk-reward remains uniquely tempting with the US Administration Iran hawks constantly in Trumps ear
G20 is triggering a few heebie-jeebies in the equity markets
With equity market trading at close to all-time highs, I think it's safe to say US tariff escalation is NOT base case scenario. So, let's say an increase in tariffs would be a significant shocker, and the impact on the equity market and risk asset could be massively sizable as the tariffs would trigger a vicious risk off cycle as recessionary fear rocket higher.