Investing.com – The pound hung onto gains against the dollar on continued hopes over a Brexit deal despite some experts suggesting the optimism could be misplaced amid fresh U.K.-EU trade talks that got underway Tuesday.

GBP/USD rose 0.25% to $1.2877, after rising above $1.29 intraday.

The strong start to the week for sterling may hint at progress over a post-Brexit deal in the wake of cautiously optimistic comments from both the U.K. and EU, but “nothing has changed,” Commerzbank (DE:CBKG) said.  The FX market, however, “seems to be taking a more optimistic view,” at the “risk of bitter disappointment if the negotiations this week do not result in any progress,” it added.

The U.K.-EU talks come in the midst of souring U.K.-EU relations after British Prime Minister Boris Johnson proceeded with an internal market bill that undermines the Brexit withdrawal agreement.

In an attempt to extend an olive branch, the U.K. has submitted new draft negotiating papers to find a way past the key sticking issues including fisheries, the “level playing field,” and social security coordination, according to media reports.

Brexit talks aside, the Commerzbank also warned that upside for the sterling would likely be limited by the second wave of the virus that has forced the U.K. government to renew restrictions that could be be “stepped up” to curb the outbreak.

Further restrictions would hurt the economic recovery and likely prompt the Bank of England to take a deeper look at negative rates despite Bank of England member David Ramsden pushing back on the idea on Monday.

“If we do not see some relief on the corona front in the UK soon speculation about further expansionary measures and negative interest rates might increase again and put pressure on sterling,” Commerzbank bank said.

Investing.com – The dollar was down on Friday morning in Asia, reversing earlier gains despite the lingering doubts over the latest U.S. stimulus packages. Meanwhile, the Chinese yuan was boosted by the inclusion of Chinese debt to FTSE Russell’s World Government Bond (WGBI) index.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.03% to 94.365 by 9:52 PM ET (1:52 AM GMT).

U.S. markets rose on Thursday over increased hopes that the U.S. Congress would break a months-long impasse to pass the latest COVID-19 stimulus measures. Democrats in the U.S. House of Representatives announced that they are working on a $2.2 trillion coronavirus stimulus package that could be voted on next week. News that House of Representatives Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin could resume stalled stimulus talks.

But some investors remained skeptical on whether Congress could overcome the impasse. U.S. President Donald Trump’s refusal to commit to a peaceful transfer of power should he fail to be re-elected in November’s presidential elections, increasing the chances of a disputed election.

Meanwhile, data released on Thursday showed that the number of Americans claiming unemployment over the past week increased to 870,000, indicating a slowdown in the economic recovery and highlighting the pressing need for Congress to pass the support measures.

“We have seen lately the dollar gaining as risk assets are sold off. We need to see whether this will continue beyond the end of this month,” Daiwa Securities senior strategist Yukio Ishizuki told Reuters.

The USD/JPY pair inched up 0.07% to 105.47.

The USD/CNY pair was down 0.22% to 6.8123. The offshore yuan reversed its decline over the past week after FTSE Russell’s announcement that Chinese government bonds will be added to the WGBI index starting in 2021.

“Foreign ownership of Chinese government bonds has picked up steadily. The inclusion in the WGBI benchmark will prompt additional foreign flows into the Chinese bond market and support the yuan,” Commonwealth Bank China economist Kevin Xie told Reuters.

The AUD/USD pair edged up 0.14% to 0.7055 and the NZD/USD pair inched up 0.02% to 0.6551.

The GBP/USD pair inched up 0.04% to 1.2754. The pound was supported by U.K. Chancellor of the Exchequer Rishi Sunak’s ‘winter plan’ proving limited support for workers as the country continues to battle against a second wave of COVID-19.

NEW YORK (Reuters) – Asian stocks opened lower on Thursday, tracking a sharply lower Wall Street session amid fresh concerns that the global economic recovery is running out of steam.

U.S. stocks fell on Wednesday after data showed business activity slowed in September, with gains at factories more than offset by a retreat at services industries.

Investors now await weekly data due later on Thursday, which is expected to show U.S. jobless claims fell slightly but remained elevated, indicating the world’s largest economy is still far from recovering.

The data comes after a Federal Reserve official said it will be hard to boost employment without further government stimulus.

However, with congress locked in a stalemate, analysts see immediate fiscal support as unlikely.

“Equity sentiment remained positive in Europe but quickly soured in the U.S. as Fed speakers urged further fiscal support for the economy,” Westpac Institutional Bank analysts said in a note.

In Asia, E-mini futures for the S&P 500 fell 0.11%, Australia’s S&P/ASX 200 (AXJO) lost 1.6% and Japan’s Nikkei 225 (N225) declined 0.56%. Hong Kong’s Hang Seng index futures (HSI) (HSIc1) dropped 0.92%.

Additionally, a second wave of coronavirus infections in Europe threatened the economic recovery in that region pushing equities lower and propping up the safe-haven the safe haven dollar.

On Wednesday, the Dow Jones Industrial Average (DJI) fell 1.92%, the S&P 500 (SPX) lost 2.37% and the Nasdaq Composite (IXIC) dropped 3.02%.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.04% higher, while Japan’s Nikkei (N225) %.

Strength in the dollar, which rallied to a two-month high on Wednesday, weighed on gold prices.

The dollar index (=USD) rose 0.393%, while spot gold dropped 0.3% to a two-month low at $1,858.39 an ounce.

Oil prices advanced slightly after reports that inventories were down across the U.S. but gains were muted by uncertainty about demand going forward as travel remains limited due to the pandemic.

Brent crude (LCOc1) rose 5 cents to settle at $41.77 a barrel. U.S. West Texas Intermediate crude (CLc1) gained 13 cents to settle at $39.93 a barrel.

The yield on Treasuries Benchmark 10-year (US10YT=RR) rose 1.3 basis points to 0.677% on Wednesday while the 30-year bond yield (US30YT=RR) rose 1.2 basis points to 1.427%.

Investing.com – European stock markets are seen opening higher Tuesday, with expectation growing ahead of Thursday’s policy meeting of the European Central Bank. However, investors will be keeping a wary eye on the U.S. tech sector as Wall Street returns from holiday.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.3%, while the FTSE 100 futures contract in the U.K. rose 0.4%. 

“The eurozone is still on track to see a very strong third-quarter growth figure. However, recent indicators signal some deceleration. Inflation is undershooting expectations, paving the way for an extension to the Pandemic Emergency Purchase Programme,” said ING’s Peter Vanden Houte, in a research note.

The European Central Bank meets on Thursday, and expectation is growing that it may be forced into action following the Federal Reserve’s change in inflation tolerance at its last meeting at the end of August.

“The ECB is under pressure to prevent further strengthening of the EUR with core inflation already at record-lows. We expect [President Christine] Lagarde to bring promises of more policy easing to next week’s ECB meeting, if not concrete easing measures,” analysts at Nordea said, in a research note published late last week.

The eurozone economy is expected to rebound in the third quarter from a record=breaking drop in the three months through June. France’s official statistics agency confirmed earlier Tuesday its forecast of a 9% drop in gross domestic product in 2020 due to the coronavirus pandemic. Overall though, second-quarter GDP numbers have been close to the ECB’s baseline forecast, board member Isabel Schnabel said last week.

Earlier Tuesday, Japan’s economy, the world’s third-largest, shrank an annualised 28.1% in the second quarter, more than a preliminary reading of 27.8%.

Investors will also be keeping a wary eye on the return of the U.S. market after the Labor Day holiday. The dominant tech sector, which has seen mammoth gains throughout the Covid-19 pandemic, hit the skids late last week due to doubts over positioning and stretched valuations.

Oil prices dropped Tuesday, with the U.S. WTI contract suffering the bulk of the selling after the U.S. Labor Day long weekend, which marks the end of the peak U.S. driving season.

U.S. crude futures traded 1.7% lower at $39.09 a barrel, while the international benchmark Brent contract fell 0.1% to $42.00. 

Elsewhere, gold futures rose 0.3% to $1,940.30/oz, while EUR/USD traded 0.1% higher at $1.1825.

SYDNEY (Reuters) – Asian shares were on the defensive on Monday as investors grappled with sky-high valuations against the backdrop of a global economy in the grip of a deep coronavirus-induced recession while oil prices dropped sharply.

Chinese stocks started lower while shares of Hong Kong-listed Semiconductor Manufacturing International Corp (SMIC) plunged to the lowest since June 16 on fears the firm could be added to a U.S. trade blacklist.

China’s blue-chip index slipped 0.5% and Hong Kong’s Hang Seng eased 0.2%.

Japan’s Nikkei fell 0.4% with SoftBank coming under heavy selling following media reports it has spent at least $4 billion buying call options on listed U.S. technology stocks.

Australian shares, which had opened in the red, reversed losses to edge up 0.1% led by miners, while South Korea added 0.4%.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan barely changed after two straight days of losses toppled it from a 2-1/2-year peak last week.

World shares hit a record high last week as central bank stimulus drove asset valuations to heady levels. The rally has since cooled as tech stocks sold off while worries over patchy economic recovery dogged investors.

The immediate focus on the day will be on China’s exports and imports data for August, due later in the morning.

China’s exports are expected to have posted a second month of solid gains in August as more of its trading partners relaxed coronavirus lockdowns and reopened their economies, a Reuters poll showed.

U.S. stock futures opened in the red, with E-minis for the S&P 500 down 0.3% and Nasdaq futures sliding 1.1%. U.S. markets will be closed on Monday for Labor Day.

Nasdaq futures were dragged lower by the exclusion of Tesla (NASDAQ:TSLA) from a group of companies that were being added to the S&P 500.

Analysts at Jefferies (NYSE:JEF) expect the equities market correction to extend further.

“Our risk indices have begun to turn from their euphoria highs,” Jefferies said.

“It is not unthinkable that global equities are set to churn in a range for a while as some of the orphan sectors/countries are refranchised while the richly valued sectors pause or unwind,” it added.

“On the balance of probabilities, last week’s correction has further room to go.”

Jefferies said it was switching its weighting on MSCI All World index to “tactically bearish” in the short term.

It noted that a gauge of volatility has nudged higher in the past three months alongside a steepening in U.S. 10-year to 5-year Treasury yield curve as well as the 30-year to 5-year curve.

“We wonder how much moves in both would upset the equity market,” Jefferries said.

Later this week, investors will look for data on U.S. inflation with both producer and consumer prices expected to remain mostly steady.

“With slack in the labor market and broader economy to remain for years, it’s hard to see where sustainably higher inflation will come from,” Brown Brothers Harriman said in a note.

“That said, the bottom line is that U.S. rates will stay lower for longer. Full stop.”

In commodities, oil prices dropped more than $1 a barrel, hitting their lowest since July, after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months.

Fading optimism about demand recovery amid the coronavirus pandemic also weighed. U.S. crude fell 1.3% to $39.24 a barrel. Brent crude skidded 1.1% to $42.16.

Policy meetings at the Bank of Canada on Wednesday and the European Central Bank (ECB) the following day are also on investors’ radar, with both expected to keep policy steady.

Action in the forex market was muted.

In currencies, the dollar was flat against the yen at 106.27 ahead of a heavy week of macroeconomic data with figures on household spending, current account and gross domestic product due on Tuesday.

The euro held at $1.1838 while the British pound was a 0.3% weaker at $1.3241 ahead of a new round of Brexit talks with the European Union on Monday.