Fed, ECB, Polls, Ballots & Debates

USD remains mixed even after the US Empire manufacturing index (NY ISM) fell to 3-year lows (see more below). The chance of a significant breakthrough between the US and China at the G20 meeting is fading. CFTC positioning data showed that USD longs continue to falter but remain dominant on a net-basis. Gold net have broken out key resistance. All eyes on this week's central bank meetings from the US and UK as well as the annual weekl-long ECB conference at Sintra in Portugal -- where speeches from Draghi & comp will serve as the equivalent of a Thursday press conference (More below) . Gold and bond yields appear to be making up their minds, rising and falling respectively ahead of the Fed but USDX remains mixed.  GBP traders await three more ballots for the PM race due Tuesday, Wednesday and Thursday. Anti-no deal Brexit Rory Stewart is the fastest gainer in the odds.

The chance of a genuine breakthrough at the G20 has fallen to almost nil. There have been no reports of serious preparatory talks or meaningful discussion on the main trade issues. That could be happening through back-channels but it's tough to believe it would be kept quiet.

US Commerce Sec Wilbur Ross said a deal with China can be achieved, but it won't come at the G20. One positive sign was that VP Pence delayed a speech that was harshly critical of China and was slated to be delivered on the anniversary of the Tiananmen Square massacre. There are signs, however, that it's being rescheduled for after the G20.

Trump had said it was imperative that Xi attend the meeting or that fresh tariffs would be levied, however he changed his tone last week and said it wasn't imperative that Xi attend.

At the moment, the market is optimistic about Fed easing and progress on a deal. Wednesday's FOMC will be a major market-mover.  Expect indices to get some cold feet ahead of the Fed early in the week but the main theme will be consolidation.

The Empire Fed on Monday fell by the most on record, all the way to -8.6 from +11.0. That was also the lowest reading since October 2016.

Sintra Week

The importance of the ECB's annual Sintra conference is its inidcation for the markets. Recall how the euro rallied after the July 6th conference when Draghi sounded less dovish than expected. Should he and his colleagues offer a similar disposition to policy, we could see EURUSD push higher. The question is: Will any bounce in the euro serve as an offset to a possible Wednesday euro sell-off that could be the result of a not-so dovish Fed? 

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -87K vs -88K prior GBP -45K vs -48K prior JPY -45K vs -44K prior CHF -25K vs -36K prior CAD -33K vs -42K prior AUD -63K vs -63K prior NZD -16K vs -20K prior