Overview
US President Donald Trump created confusion for the markets over the weekend when he seemed to suggest China was desperate for a trade deal.
Talking to the media on Saturday, Trump claimed Chinese supply chains were “broken like an egg.” He then went on to say that the trade talks were nonetheless going along “very nicely.” He said his administration would make a deal only if it was the right one for America, seeming to
“They want to make a deal, perhaps they have to make a deal, I don’t know, I don’t care, that’s up to them,” he said. “There was a lot of incorrect reporting, but you will see what I’m going to be doing. There’s a difference on tariffs, but we can always get tariffs.”
Trump had earlier on Friday dismissed remarks by both American and Chinese officials that the world’s two-largest economies had reached an understanding to mutually and simultaneously cancel tariffs on each other’s goods. The two sides had said the cancellations would take place gradually as Beijing and Washington gear up for the so-called Phase-1 deal.
“I haven’t agreed to anything,” the US President said on Friday, halting the initial positive market reaction.
On Tuesday, the President will be delivering a speech at the Economic Club of New York.
A day later and on Thursday, US Federal Reserve Chairman Jerome Powell will appear in front of a joint committee at the Congress to answer questions by senators and representatives. The Fed once again slashed its federal funds rates by 25 basis points during its last policy meeting last month.
Asian markets are holding autious by the renewed concerns over whether China and the US can reach a deal after Trump appeared to imply Beijing was desperate for a deal. Another factor keeping investors weary is the ongoing demonstrations in Hong Kong.
Anti-China Protests turned violent on Monday as police fired live bullets leading to the wounding of three people, two in critical conditions. The autonomous city’s Chief Executive Carrie Lam warned protesters they would not succeed.
“We will spare no effort in finding ways and means that could end the violence in Hong Kong as soon as possible,” she said while describing demonstrators as the “enemy of the people.”
The UK economy grew at its slowest annual rate in almost a decade, according the figures released by Office for National Statistics on Monday.
The year-on-year GDP in the three months ending in September slowed to 1% from the previous quarter’s 1.3%. “Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade,” a spokesperson for the ONS said.
Facing the Brexit crisis and early elections next month, the British economy avoided entering into a recession by adding up 0.3% in the third quarter.
The common currency is trying to reverse the losses last week as it seeks support from the incoming German growth figures later this week. The relative loss of strength in the dollar has hastened the interest in the euro as it aims for 1.1065 at the 38.2 Fibonacci retracement. Further above 1.1100 and then 1.1120 can be followed. Another fall in pricing should take the pair down to 1.1000 and then 1.0970.
The pound saw a surprise upwards move on Monday as the Brexit Party leader Nigel Farage entered the early election game and announced his strategy as not running against Prime Minister Boris Johnson’s ruling Conservatives. The hardliner anti-EU politician pledged to try to depose Labour Party lawmakers in their pro-leave strongholds. Positive 3rd quarter growth figures were another incentive for the buyers of the British currency. Having gotten rid of the Brexit uncertainties, at least for the time being, the sterling is likely to proceed with its upwards march, first targeting 1.2940 level. Further above, we will follow the recent top at 1.3000 and then 1.3060, near an 8 month-high. In the event of a reversal, typically due to a re-strengthened dollar, 1.2800 and then 1.2750 must be watched. Still below, 1.2700 at the 38.2 Fibonacci retracement provides support.
The Japanese yen is once again the attractive safe-haven asset as Sino-US talks appear to be making no substantial breakthrough despite suggestions otherwise by both countries’ officials. Trump’s comments over the weekend only added to the concerns and revitalized the interest in the yen. As the pair price continues to draw down, we will be watching 108.80 and then 108.60 below the 50 percent Fibonacci retracement. Further below 108.50 at the 61.8 Fibo should be followed. Fed Chair Jay Powell’s testimony at the Congress might momentarily affect pricing in dollar-paired assets. In the event the dollar gets back its usual dominance, then 109.20 and 109.50 should be followed.
The pair price is in the ascent mode due to the ongoing strength in the US dollar amid uncertainties revolving around the trade talks with China. The oil market is holding its ground as the Middle Eastern tensions between Iran and Saudi Arabia have now subsided, and in turn the Canadian dollar is losing steam. With the pair price still rising, it’s aiming for 1.3270 and then 1.3300. But first it has to overcome the resistance at 1.3230. Further above 1.3330 must be followed. In the event the canadian dollar gets back on its feet, 1.3200 and 1.3150 should be watched.
