SECURITY: White House Pushes Russian-Leaning Peace Plan On Zelenskyy
Reuters reports that the US has signalled to Ukrainian President Volodymyr Zelenskyy that Ukraine “must accept a US-drafted framework to end the war with Russia that proposes Kyiv giving up territory and some weapons,” two people familiar with the matter said, adding that Washington wants Kyiv to "accept the main points.”
- As noted in today's edition of the US Daily Brief, the White House likely believes that Zelenskyy will have to accept the plan on offer, drafted without Ukrainian input, due to increasing battlefield pressure and a growing domestic corruption scandal. Dasha Burns at Politico reported earlier that a senior White House official said a peace agreement between Russia and Ukraine could come as soon “as soon as this week” and likely by the end of the month.
- Christopher Miller at the Financial Times reports on X: “I can confirm a hasty US-Russia proposal being pushed to Ukrainians... It would amount to Ukraine’s capitulation, with people familiar telling me it’s merely the Kremlin’s maximalist demands.”
- According to Miller, the proposals include, “Ukraine army cut in half, Give up certain weapons, Give up Donbas.” He notes that sources say Zelenskyy is “displeased”.
- Yaroslav Trofimov at the Wall Street Journal reports that while Zelenskyy’s standing is “precarious" amid the corruption scandal, "the last thing Zelensky can afford politically at home is to agree to the concessions of the supposed Witkoff-Dmitriev plan, whatever they are. Being seen to buckle to Russian demands because his buddies were just caught stuffing their pockets would be political death.”
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EURUSD TECHS: Bullish Outlook
- RES 4: 1.1919 High Sep 17 and a bull trigger
- RES 3: 1.1820 High Sep 23
- RES 2: 1.1775 61.8% retracement of the Sep 17 - Oct 9 bear leg
- RES 1: 1.1730 50.0% retracement of the Sep 17 - Oct 9 bear leg
- PRICE: 1.1656 @ 17:09 BST Oct 20
- SUP 1: 1.1602/1542 Low Oct 9 and the bear trigger
- SUP 2: 1.1516 76.4% retracement of the Aug 1 - Sep 17 bull leg
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
The latest recovery in EURUSD has resulted in a clear breach of the 50-day EMA, currently at 1.1671. This undermines a recent bearish theme and suggests the corrective cycle between Sep 17 - Oct 9, may be over. Note that MA studies are in a bull-mode position highlighting a dominant medium-term uptrend. A resumption of gains would open 1.1775 next, a Fibonacci retracement. Key support and the bear trigger lies at 1.1542, the Oct 9 low.
FOREX: NZD Outperforms, Nomura Recommend Long NZDCAD
- New Zealand Q3 CPI came in at 1.0% Q/q overnight, one tenth above market expectations. While the data overall was close to RBNZ expectations, NZD does stand 0.40% higher on the session, assisted by the constructive price action for major equity indices late Monday. Despite the bounce for NZDUSD, bearish conditions remain firmly intact, with the pair remaining just 1.15% above cycle lows at 0.5683, 6-month lows for the pair.
- Interestingly, Nomura hold a contrarian, somewhat upbeat macro view on New Zealand. They believe markets over-reacted to the sharp reported decline in Q2 GDP data, and that overall policy settings are setting the stage for a progressive economic recovery over the coming year. Nomura believe that the easing cycle has – more likely than not already concluded.
- Nomura enter a new long NZD/CAD trade, targeting a move to 0.8315 (~3.6% from entry) by end-December, with a conviction level of 3/5, and with a stop at 0.7900, around 2% from current spot levels. Expressing their positive NZD view against another DM commodity currency also helps to protect a little against externally-driven volatility and swings in global risk sentiment.
CANADA: Initial Analyst Takes See BoC Surveys Supporting Cuts
Odds of a 25bp cut from the BoC on Oct 29 have seen a sizeable increase over the past week, from close to a 50/50 call in the middle of last week before broader risk off and then Gov Macklem helped see dovish moves in the second half. Today's BoC surveys haven't detracted from this, with OIS pointing to 19-20bp of cuts.
- BMO: “BoC Governor Macklem has prioritized risk management amid the ongoing uncertainty surrounding the economic outlook. The Q3 business and consumer sentiment surveys highlight that the net risks continue to tilt negative, especially for the labour market. The Bank of Canada still has tomorrow's CPI report to weigh ahead of next week's decision, although the odds of a cut have risen after these reports.”
- Desjardins: “The latest Bank of Canada surveys underscore the case for additional rate cuts, echoing Governor Macklem’s downbeat remarks from late last week. Responses in both the business and consumer surveys highlighted weakness in the labour market. […] The timing of the Bank of Canada’s surveys make it difficult to interpret the results. That said, with inflation expectations, if anything, lower than what was reported in these surveys and the economy nowhere near full health, we see a strong case for further rate reductions. We continue to forecast two more 25 basis point cuts for this cycle, which would take the policy rate down to 2.00%.”
