A sea of Green Across Asian Markets as US-China Trade Optimism Reawakens

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The Chinese Offshore Yuan was one of the biggest beneficiaries from this development, having gained about 0.6 percent since Trump’s tweet to return below the psychological 6.90 level against the US Dollar. The South Korean Won climbed 0.7 percent, while the Singapore Dollar and Malaysian Ringgit strengthened by 0.2 percent versus the Greenback, as the currencies of trade-dependent economies enjoy the rise in optimism.

Markets have been desperate for some glimmer of hope on the trade front, and Trump’s latest tweet once again underscores the fluidity surrounding US-China relations while proving that market sentiment can still turn on a dime. Optimism over the resumption in US-China trade talks has given risk appetite a shot in the arm and is expected to support market sentiment leading up to the eagerly-anticipated Trump-Xi meeting in Japan next week.

Cautious optimism is warranted, given fluidity surrounding US-China trade developments

With investors reenergized by Trump’s comments, markets will hope that a US-China deal is still on the table. A significant resolution to the US-China standoff could potentially help global economic growth regain some momentum while boosting investor sentiment further.

Markets however must be mindful that sentiment does not overtake the reality of trade negotiations, as “extended talks” does not necessarily translate into the removal of US-China trade tariffs that have weighed on global growth. There remain fundamental differences between the world’s two largest economies. It remains to be seen whether this impasse can be resolved in a meaningful and lasting way. Should markets get ahead of themselves and overamplify the prospects of a US-China trade deal, an outcome that fails to meet elevated expectations could unravel recent gains in Asian assets.

Trade optimism threatens to undermine Dollar’s resilience and ease the Fed away from the dovish stance

The flare up in risk appetite puts the Greenback’s recent gains on shaky ground, as the Dollar index (DXY) currently steadies above the 97.6 marks at the time of writing, leading up to the Federal Reserve’s policy announcement. While the Federal Reserve is not expected to lower interest rates this week, despite the mixed US economic indicators so far in Q2 and the ongoing US-China trade conflict, Fed chair Jerome Powell’s policy statement and economic outlook could still have an outsized impact on the markets.

Dollar bears may have the wind knocked out of their sails should the Fed adopt a tone that’s less-dovish-than-expected, even as the market clamour for a US interest rate cut still rings loud and clear. A US-China trade deal that ultimately lifts tit-for-tat tariffs could also prompt the Fed to back away from its projected easing bias, which in turn may discourage Dollar bears.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Fed Messaging the Key Focus for Week Ahead

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Asian currencies began the new week on a mixed note against the US Dollar index, with the DXY holding on to gains around the 97.5 mark following better-than-expected US retail sales and manufacturing output data. The mixed economic indicators out of the world’s largest economy are threatening to erode the case for a Fed rate cut, even as markets cling on to expectations for some measure of US monetary policy easing over the coming months.

All eyes will be on the Federal Reserve’s policy announcement on Wednesday, where any hint of waning patience from policymakers could undermine the Greenback’s recent gains. It remains to be seen which part of the economic equation will hold most of the Fed’s attention – confidence that the US economy’s record-breaking expansion has more room to run, or the growing downside risks stemming from President Donald Trump’s trade conflicts with global economies. Should markets detect the Fed’s bias towards an “insurance” rate cut, the Dollar index could retrace towards its 100-day moving average of 97.0, with stronger support potentially coming at its 200-day moving average of 96.59.

Is market pessimism overdone?

As strong headwinds continue to swirl around the global economic outlook, coupled with geopolitical risks that are keeping investors on edge, safe havens appear cocooned in a supportive environment. So far this month, the Japanese Yen has mostly traded around the 108 handle against the US Dollar, Gold has remain supported above the $1,320 level, while 10-year Treasury yields have stayed mostly below 2.15 percent, around its lowest levels since 2017.

Amid the thick cloud of risk aversion evident in the markets, investors may be underpricing the likelihood of a positive surprise out of the G20 summit later this month. A Trump-Xi meeting that marks a resumption of US-China trade talks isn’t the base case for many investors at this point in time. However, a positive surprise on this front could significantly alleviate risk sentiment and move USDJPY back towards the 110 handle while Gold could trade back below the psychological $1,300 mark.

Oil traders reminded of fragile demand outlook amid supply-side risks

Brent crude is holding above the $62/bbl at the time of writing, as OPEC continues to stoke market confidence that the ongoing supply cuts will be extended through 2019; with the decision potentially made in early July. OPEC+ producers’ attempts to rebalance the markets could also get a boost by the seasonal pickup in demand in the second half of the year.

Oil bulls may also point to geopolitical tensions in the Middle East as further justification to reclaim gains, as supply risks make a return to investors’ radars. However, markets have been reminded of the fragility of the demand outlook, following the International Energy Agency’s forecasts that supply will outgrow demand in 2020. This could quickly tip markets into oversupplied conditions and limit gains for Oil prices over the course of this year.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Asian Stocks Ease Up on risk-on Mode, as Trump Repeats Germany Criticism

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With Asian stocks following Wall Street lower on Thursday, the US-China trade tensions appear to have knocked the wind out of risk-on sails for now. Equity traders are left floating aimlessly as they await a new gust of developments that could signal the next direction for global markets.

US President Donald Trump isn’t easing up on the tensions with major economies, as he reiterated criticisms against Germany over defense spending and its gas pipeline with Russia. Markets are having to grow accustomed to heightened global tensions, where risk sentiment remains easily swayed by the prospects of further deterioration in relations between major economies. Should Trump’s sharp rhetoric translate meaningfully into more downside risks for global trade, that is sure to deal another significant blow to the already fragile market sentiment, which could trigger another sell-off in risk assets.

Oil drops as tensions rise within OPEC+ amid waning global demand outlook

Brent futures are testing the psychological $60/bbl mark, after shedding some 5.5 percent over three consecutive days of declines. This is fuelled by concerns over rising US stockpiles, amid a backdrop of heightened US-China trade tensions that risk dragging global growth lower. Markets are hoping that the slump in Oil prices will be enough for OPEC+ members to overcome tensions within the group and collectively focus on the task at hand: to rebalance global markets and put a floor under Oil prices.

Saudi Arabia has been taking up Iran’s market share following US sanctions on Iran’s exports, while Russia continues to exert its influence over key decisions within the alliance. These internal tensions are being blamed for the uncertainty surrounding the exact date for the next meeting in Vienna. An OPEC+ alliance that appears to be fraying could add to market uncertainty and exert more downward pressure on Oil prices, potentially sending Brent towards the next support line of $58.50/bbl in the lead up to the next Vienna meeting, whenever that may be.

Oil’s recent decline indicates that OPEC+ producers may have little choice but to extend its ongoing supply cuts program going into the second half of the year. Should global demand shrink further despite the supply cuts extension, this may result in a marked return of oversupplied conditions which could see Oil unwind the remnants of its year-to-date gains.

UK leadership transition to add more uncertainty to Pound’s outlook

The Pound has been drifting along with the 1.27 level against the US Dollar since last week, with traders awaiting the next chapter in the UK political saga, as the first of several rounds of votes are cast on Thursday in the Conservative Party’s quest to find Theresa May’s replacement. The UK leadership transition adds another layer of uncertainty over Sterling’s outlook until the new UK Prime Minister is appointed, potentially by the end of July.

Should markets get the sense that a hardline Brexiteer has the likelier chance of taking over at 10 Downing Street, such expectations could see GBPUSD test the 1.244 level, with stronger support potentially arriving at the psychological 1.20 mark. It remains to be seen how the new PM will overcome the challenges that May faced in passing a Brexit deal that was palatable to all stakeholders, with such uncertainties ensuring that the Pound remains politically-sensitive leading up to the October 31 Brexit deadline, where a no-deal Brexit remains the “worst-case” scenario for markets.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar Rebounds After US-Mexico Deal, Disappointing US Jobs Data

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The US Dollar index (DXY) has rebounded slightly to trade around the 96.7 level at the time of writing, after the May US non-farm payrolls data came in far below market expectations, while a US-Mexico deal averted new US tariffs being imposed on Mexican imports on Friday.

Despite shedding over one percent so far this month, the DXY continues to demonstrate its resilience, appearing to take perceived disappointments in its stride. Several US economic indicators in the second quarter suggest that US economic growth momentum is waning, perhaps warranting a US interest cut by the Federal Reserve over the coming months. The US central bank may well intervene on its monetary policy settings to sustain growth in the world’s largest economy, which is on the cusp of its longest-ever expansion come July.

Even though ramped-up market bets for a Fed rate cut this year have created a somewhat Dollar-negative environment, those hoping for the DXY to capitulate may be left disappointed, given the relatively weak pushback from other G10 currencies. Economic woes continue to cloud the Euro’s outlook, while the Pound remains mired in the Brexit bog, implying that these major components in the Dollar index may only offer limited resistance. The Japanese Yen however could curtail the Dollar’s momentum, especially if trade tensions further intensify and pose a bigger threat to the global growth outlook, spurring investors to flock towards safe haven assets.

Oil recovers as Saudi Arabia, Russia appear to agree on extending production cuts

Brent futures continue rising above the $60/bbl support level, on course for three consecutive days of gains, after the Saudi Arabian Energy Minister expressed confidence that OPEC+ producers will prolong their output cuts program through the second half of 2019.

With Oil prices recently flirting with a bear market, slowing global demand appears to be featuring prominently on the markets’ collective mind, as the fallout from heightened trade tensions continues to be felt in the global economy. The sustainability of Oil’s recent climb could be determined by the outlooks of several key industry bodies scheduled this week, whereby more downcast projections for global demand could prompt traders to continue chipping away at Oil’s 15 percent year-to-date gains.

Risk appetite clawing back on Monday

Risk-on mode appears to be seeping back into the markets on Monday, with most Asian stocks starting off the new week on a stronger note. Gold fell 0.9 percent and is now trading below the $1,330 handle while the Japanese Yen erased Friday’s gains to trade above the 108.4 marks against the Dollar at the time of writing.

Despite the disappointing US jobs data and the US-Mexico deal, Asian currencies however are mostly weaker given the Dollar’s rebound. Today’s price action once again highlights the narrative surrounding Asian currencies which remains a Dollar-driven story, even as regional economies contend with the headwinds felt from the heightened uncertainties surrounding the global growth outlook.

Further bouts of risk aversion sparked by another escalation in trade tensions, particularly between the US and China, could undo recent gains for Asian currencies, while severely curtailing appetite for risky assets.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar Weakens Amid Rising Bets of a Fed Rate Cut

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The US Dollar Index (DXY) has weakened by about 0.6 percent to trade around the 97.2 marks at the time of writing after St. Louis Fed President James Bullard suggested that an “insurance” Fed rate cut may be “warranted soon”. This is in contrast to the Fed’s “patient” stance at the onset of May indicating no bias for moving US interest rates either way, which Fed Chair Jerome Powell conveyed prior to President Trump ramping up trade tensions with China, Mexico and India.

With markets now pricing in more than a 90 percent chance of a rate cut at the September FOMC meeting, Bullard’s comment appears to have cracked open the door for a Fed rate cut in 2019 while also framing the FOMC meeting later this month. A more overt shift towards an easing stance by Fed officials may clear the path for one, or more, US rate cuts this year, which could also prompt more downside for the Dollar.

Trump’s tariff net could hasten Fed rate cut and spur more gains in safe havens

Rising global trade tensions are featuring more prominently on the Fed’s policy radar, with the central bank also keeping an eye on the potential fallout in financial markets worldwide in the event of a full-blown trade war. Should President Trump cast his tariff net wider and further escalate global trade tensions, this could also hasten a Fed rate cut while fuelling risk aversion across markets, prompting further gains in safe haven assets, such as Gold, Yen, and US Treasuries.

US non-farm payrolls could offset Dollar’s recent declines

Still, this doesn’t mean the Dollar’s decline will be unabated. Should this Friday’s US non-farm payrolls once again paint a robust domestic jobs market, it could test the Fed’s data-dependent stance while allowing Dollar bulls to push back.

Fund flows into US Treasuries during these times of heightened uncertainty should also provide support for the Greenback. With Europe and the UK battling their respective economic and political woes, that’s expected to limit gains for the Euro and the Pound, which in turn should help mitigate the downside for the DXY.

Oil traders ignoring Saudi Arabia’s commitment to keeping markets stable

Brent futures’ year-to-date gains have been slashed with Oil now trading around the $62/bbl handle at the time of writing. The intensification of US-led trade tensions in recent weeks has weighed negatively on the global growth outlook, adding to the downward pressure for Oil prices.

Market fears over the resilience of global demand for Oil have overshadowed the commitment by Saudi Energy Minister to “do what is needed” to rebalance the markets. Even if OPEC+ producers decide later this month to extend its supply cuts program through the second half of 2019, that may not be enough to significantly offset the downward momentum for Oil, as long as heightened trade tensions persist and continue snuffing out any exuberance over the global economic expansion.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Global Trade Tensions Cast Long Shadow Over Market Sentiment

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Over the weekend, China issued a government policy paper outlining its official stance on US-China trade talks, while preparing to unveil its list of “unreliable” foreign companies. Meanwhile, Mexico has sent a delegation to the US to discuss immigration-related matters, a week before the US imposes a five percent tariff on goods imported from Mexico. President Trump has also removed a preferential status from India that allowed the Asian giant to ship some 2,000 of its good to the US duty-free.

Resilient demand for safe haven assets

Such an environment ensures that safe haven demand remains resilient, as investors tread very carefully amid delicate market conditions. Gold broke past the $1,309 handle after having surged by about 2.7 percent since Thursday, while the Japanese Yen is holding around its strongest level against the US Dollar since January, hovering around the lower-108 region at the time of writing. 10-year US Treasury yields have sunk below 2.13 percent to their lowest since September 2017.

With global equities having just posted its first monthly loss of 2019, putting more risk on the table doesn’t appear to be a viable option for investors at this point in time. Unless President Trump makes a sharp U-turn and starts caring more about the global economy over his campaign promises, markets will have to come to terms with an investment climate that’s dominated by trade-tensions and heightened insecurities.

Softer Dollar allows for a mild reprieve in Euro, Pound … for now

The US Dollar index softened towards 97.75 at the time of writing, allowing G10 currencies to have some breathing space. The Greenback may ease further should the May US Manufacturing PMI due Monday come in below market expectations, as signs of a softer US economy are bound to intensify broader fears of the anticipated global economic slowdown for 2019.

Despite its recent relief against the Greenback, the Euro may come under renewed downward pressure should its economic data releases this week disappoint. This, in turn, should allow the European Central Bank to stick to its dovish stance at the June 6 meeting. The clouds over the Euro’s outlook will only grow heavier should the US-China dispute intensify, while Italy’s fiscal dispute with the EU administration threatens to erode investor sentiment surrounding the Eurozone.

Pound traders will be keeping a close eye on the hunt for a new UK Prime Minister, as Theresa May prepares to step down. Although the change at the top isn’t expected to be completed until end-July, Sterling may still react to the political jostling between the 13 PM candidates, as fears of a no-deal Brexit cast a long shadow over this leadership transition.

China’s Caixin Manufacturing PMI extends expansionary streak

Chinese stocks began the new month on a positive note, as China’s May Caixin Manufacturing PMI secured a run of three consecutive months of expansion. Broader Asia is expected to continue relying on the Chinese economy, even as the region weathers the heightened uncertainties from prolonged US-led trade tensions around the world. Investors are mindful that Asian assets are very much exposed to global risk sentiment which could deteriorate further if the ongoing trade conflict between major economies takes another turn for the worse.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Trump Pulls on Tariff Trigger Again, Setting up June Jitters

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The move is aimed at stopping illegal immigration, and the tariff rate could be raised to 25 percent by October 1, unless Trump deems illegal immigration has been “remedied”.

Markets were left reeling from the announcement that came out of the blue, with the Mexican peso immediately slumping by over two percent against the US Dollar before paring declines, while Asian stocks and currencies extended their drop for the month. Safe haven assets are gaining at the time of writing. As Gold rallied past the $1,290 level, the Japanese Yen strengthened towards the 109.2 level against the US Dollar, and 10-year US Treasury yields fell further below the 2.20 mark.

May bookended by Trump’s unpredictability

Trump’s apparent trigger-happy ways in imposing tariffs on major trade partners have bookended the month of May, severely dampening hopes of a global economic rebound this year. Given Trump’s overt displays of tremendous unpredictability, investors are left with little choice but to adhere to the risk aversion theme, as the US-led trade tensions risk opening up on new fronts and spilling over into sectors beyond trade.

Such heightened uncertainties set markets up for a jittery June, barring a major turnaround in the US administration’s trade stance in the near-term. In the interim, markets will be desperately scanning the horizon for any signs of relief over the coming months, even as they prepare for the likelier scenario of protracted uncertainty that risks becoming a bigger drag on global growth.

Dollar’s charge towards new 2019 high on pause

The Dollar’s charge towards a new 2019 high has fizzled somewhat, as the 98.3 mark appears one-step too far for the US Dollar index (DXY) for now. However, a US non-farm payroll sprint that exceeds market expectations in the week ahead could just be the catalyst required to send the Dollar index (DXY) higher, even as the Greenback remains supported by a resilient US economy.

However, the US economic outlook may face headwinds as the global economy suffers through the effects of US-imposed tariffs. Should downside risks become highlighted, the Fed may just have to succumb to market expectations and lower US interest rates, with the Fed funds futures currently pointing to a near-70 percent chance of a rate cut by September.

Oil set to register the first monthly loss of 2019 amid flare-up in demand-side uncertainties

Oil is set to widen its first monthly loss of 2019, as Brent futures tumbled towards the $66/bbl mark. Oil’s declines were fuelled by Trump’s newly-announced tariffs on Mexico, as well as concerns over rising US gasoline stockpiles which suggest weakening demand.

Such market dynamics will frame the upcoming OPEC meeting in June as a pivotal event that will shape Oil’s outlook for the rest of the year. Even the decision by OPEC+ producers to extend their supply cuts campaign into the second half of 2019 may not be enough to fully support Oil prices, should global demand deteriorate further.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Europe Parliament Election Results Favour EU Establishment, as Euro, Pound Carve Out Gains Against Greenback

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With the anti-establishment momentum seemingly constrained, for now, that should bode well for EU policy continuity, which is expected to help Europe manage the heightened uncertainties surrounding global trade as well as concerns over economic growth prospects worldwide.

Such a political base has allowed the Euro to climb back to its highest against the US Dollar in over a week, holding above the psychological 1.12 at the time of writing. Should the Euro break above its 50-day moving average of 1.123, it could find stronger resistance at its 100-day moving average of near 1.13.

Markets to view Pound through a political prism, as hunt for new UK Prime Minister comes into focus

Perhaps voters on the continent have been reminded of the virtues of the European Union dream, given the political mess that’s playing out in the United Kingdom. Judging by the European Parliament election results, Brexit has further polarized voters in the United Kingdom, with Nigel Farage’s Brexit Party set to win the most seats in the UK at the expense of Conservatives and Labour.

Following Theresa May’s announcement that she will step down as Prime Minister on June 7, the UK political lens will now focus on the leadership transition within the Conservatives, with eight candidates set to vie for her position. Any sense that chances of a no-deal Brexit are on the rise could weigh negatively on the Pound, especially if a hard-line Brexiteer takes over as PM.

Since bouncing off the 1.26 support level on Thursday, the Pound is holding above the 1.27 mark at the time of writing against the Greenback, with most G10 currencies eking out recent gains against the US Dollar.

Support for Chinese Yuan to help mitigate the downside for Asian currencies

The softer Dollar has led to gains across most Asian currencies at the start of the week, as regional stocks are putting in a mixed shift while the US and UK markets remain closed Monday for a holiday. Having shed some 6 percent over three consecutive weeks of declines, Asian equities are expected to remain sensitive to the broader US-China conflict, whereby the heightened confrontational rhetoric from both governments is keeping market participants on edge.

The Chinese Yuan is strengthening towards the 6.90 level, with the head of China’s banking and insurance regulator issuing a stern warning to those who short the Yuan that they will “inevitably suffer from a huge loss”. Should the Yuan remain supported, that is expected to help limit the downside for currencies in broader Asian, as regional economies continue to contend with external downside risks.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

‘Flight-to-safety’ Remains Default Mode as US-China Tensions Show No Signs of Thawing

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Asian markets soured further on Friday, following US stocks lower on mounting fears that prolonged US-China trade tensions could have a more drastic impact on the global economy. The selloff this month indicates that markets are pricing in the prospects of a ramp up in the US-China conflict, as both sides appear to be digging their heels in deeper over recent days.

Investors have been trimming exposures to riskier assets and seeking refuge in safe havens, with Gold jumping over one percent back above the psychological $1,280 level, while yields on the benchmark 10-year US Treasuries are now at their lowest since October 2017.

Disappointing US factory activity shows cracks in “resilient US” narrative

With the IHS Markit US manufacturing PMI hitting a 9-year low this month, investors are now concerned that the US too will not be spared from a sharper global slowdown if the US-China trade conflict persists. Following the data release, the Dollar index (DXY) couldn’t maintain its position above the 98 handle and dropped by about 0.5 percent.

Signs of a more pronounced slowdown in the world’s largest economy may prompt the Fed to shift away from its “patient” stance on interest rates and produce the rate cut that markets, as well as President Donald Trump, have been yearning for. With US inflation persistently muted, weaker US economic indicators over the coming months may be enough to tip the balance for policymakers to ease US monetary policy settings, with investors currently pricing in a near-80 percent chance of a Fed rate cut by December.

Oil tumbles on rising demand risks over protracted US-China tensions

Brent futures shed more than 4 percent to trade just above the $68/bbl mark at the time of writing, wiping out most of their Q2 gains. The rapid deterioration in US-China ties brings next month’s OPEC meeting into sharper focus. Demand side risks are set to feature prominently on the upcoming decision by Oil producers about whether to maintain production cuts going into the second half of the year.

Ultimately, the US-China standoff is expected to dent global Oil demand for 2019 and complicate attempts by OPEC+ producers to rebalance the global Oil markets, while further bouts of volatility shouldn’t come as a surprise to traders moving forward.

The pound remains mired in political uncertainties as May said to near exit

The Pound is likely to test the 1.26 support level against the US Dollar, amid reports that UK Prime Minister Theresa May is set to announce a timetable for her departure on Friday. Markets appear to have priced in some likelihood of a change at 10 Downing Street, given that the Pound has been the worst-performing G10 currency this week.

Still, investors are eager to find out what will actually transpire in this political saga, and the potential implications for Brexit. Should a hardline Brexiteer take over as Prime Minister, that potentially increases the chances of a no-deal Brexit, which could contribute to further weakness in GBPUSD.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Aussie Dollar is Worst G10 Currency So Far in May, Leading Up to Weekend’s Elections

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After testing the 0.72 resistance level mid-April, the downward momentum for AUDUSD has gathered pace going into the current month, as the re-intensification of US-China trade tensions, coupled with the recent negative data in the domestic jobs market, have ramped up expectations for a rate cut by the Reserve Bank of Australia. Since enduring a massive leg down on April 24, AUDUSD has fallen further away from the 0.70 psychological level. As headwinds grow stronger surrounding the currency pair, a meaningful break below 0.68 may even open a path towards the 0.65 level.

AUDJPY testing 76 support level

Amid the risk aversion that has permeated the markets last week, demand for safe haven assets have surged, prompting AUDJPY to test the 76 support level. The bearish channel appears firmly entrenched for the time being, as another bout of risk-off sentiment may see the currency pair opening a path towards the 75 psychological mark and below.

EURAUD to register new 2019 high?

EURAUD is well on its way back towards its year-to-date high of 1.635, which came before the flash crash that took place on Jan 3. Even against the dismal Eurozone outlook, the Australian Dollar hasn’t been able to hold its own ground against the bloc’s currency. Should this bullish momentum take the currency pair past the 1.63 handle, a new high for the year then shouldn’t come as a surprise for traders.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Sentiment Takes Advantage of Lull in US-China Trade Newsflow

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Traders are taking advantage of a lull in news flow stemming from US-China trade tensions to send Asian stocks higher, after the S&P 500 posted a third consecutive day of gains following strong US corporate earnings and economic data. Risk appetite appears to be making a mild comeback, with Gold dropping towards the $1,286 mark after breaching $1,300 earlier this week, while USDJPY is inching back towards the psychological 110 level.

Having learned their lessons from recent weeks, market participants will have to think long and hard before charging head-on into riskier territory over the near-term. The global economic outlook remains delicate, compounded by the uncertainties surrounding US-China trade ties as well as pockets of geopolitical tensions around the world, risk sentiment doesn’t yet have a strong leg to stand on, which warrants adopting a cautionary tone for the time being.

Meanwhile, the US Dollar Index climbed 0.4 percent and is currently trading around the 97.8 handles for the first time in two weeks, after positive US data offset earlier disappointing economic indicators. The stronger Greenback translated into declines for most Asian currencies, except for the South Korea Won, Philippine Peso, and the Offshore Chinese Yuan, at the time of writing.

GBPUSD hits 3-month low as PM uncertainty weighs on Pound

GBPUSD is testing the 1.28 support level for the first time since February, as the Pound endures its longest run of losses against the Euro since 2000. An added layer of uncertainty now hangs over the Brexit outlook, as UK Prime Minister Theresa May has agreed to begin the countdown to her tenure starting next month. May will first have to focus on a last-ditch attempt to get her Brexit deal approved in Parliament during the week of June 3, before working on a timetable to find her successor.

The Pound is reacting negatively to such political uncertainty, as markets try and ascertain what a new UK Prime Minister might mean for the Brexit path ahead. The downside for the Pound may be exacerbated should the vacancy for the top job be filled by a hardline Brexiteer, which then risks the return of a no-deal Brexit.

Aussie Dollar weakening ahead of federal elections

The Aussie Dollar has the dubious honour of being the worst performing G10 currency so far in May, as Australia gears up for its May 18 federal elections. Domestic political risk adds to the downward pressure on AUD, as Australia contends with soft economic data, both domestic and also external, which are raising expectations of an interest rate cut by the Reserve Bank of Australia. Given the bearish outlook for AUDUSD, the currency pair looks likely to open a path towards the 0.68 level.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Appetite Creeping Back Into Markets Amid Persistent US-China Trade Uncertainties

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Most Asian stocks are trading in positive territory, perhaps taking cues from its US counterparts which rebounded from its sharpest drop in four months. Most Asian currencies are also seeing slight gains against the Greenback. Gold is moderating slightly below the psychological $1,300 mark, while USDJPY has bounced off the 109 level to trade around 109.6 at the time of writing.

Greenback steady even as Trump repeats call for lower US interest rates to “match” China stimulus

US President Donald Trump has once again called on the Federal Reserve to lower interest rates, in a bid to “match” stimulus measures in China. He described such a move by the US central bank as “game over”, and that the US will win in its trade conflict with China.

Amid such repeated calls by Trump for US interest rates to be lowered, the Dollar index is holding around the 97.5 marks at the time of writing, even though the Fed funds futures now point to more than a 70 percent chance of an interest rate cut by December. Markets are casting an eye over the potential ramifications of heightened trade tariffs on the US inflation and growth outlook, which may ultimately tip the balance in favour of a Fed rate cut before 2019 is over.

US retail sales, industrial production data may serve as near-term Dollar catalysts

The US Dollar may be bolstered in the near-term, should the US retail sales and industrial production data due later Wednesday come in better-than-expected. The Greenback’s upward trajectory in 2019 is likely to remain intact as long as the US economy continues to be in a “good place”, an oft-used refrain by Fed officials. Broader concerns over the ramp-up in US-China trade tensions should also support the US Dollar, as it offers investors refuge during periods of uncertainty.

Although growth momentum in the world’s largest economy is expected to moderate over the course of the year, especially once the new trade tariffs take hold on the real economy, the US is still set to perform better than its peers in the developed world, underpinning the base case for a resilient US Dollar moving forward.

Bank Indonesia policy guidance in focus amid Rupiah weakness, growing external downside risks

Bank Indonesia’s Board of Governor meeting begins today, as investors wait to see if policymakers will deploy some of its 175 basis points in hikes from 2018 to support the Indonesian Rupiah, which has weakened by some 1.4 percent against the US Dollar so far this month. USDIDR has been opening a path towards the 14,500 level, with the Rupiah having wiped out most of its year-to-date gains against the Greenback.

Noting the Rupiah’s recent weakness, coupled with growing eternal headwinds in light of heightened US-China trade tensions, it remains to be seen whether Bank Indonesia’s policy decisions may eventually fall in line with the regional policy trend. This is especially given that the central banks in the Philippines, Malaysia, and New Zealand each lowered their respective benchmark interest rates last week.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets on Tenterhooks Awaiting Next US-China Trade Development

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Except for the Japanese Yen, most Asian currencies are now weaker against the US Dollar. The Shanghai Composite Index opened 1.5 percent lower before paring losses at the time of writing, as most Asian equities also declined on Monday morning. Meanwhile, S&P500 futures are now down one percent, potentially adding more pain to US stocks which last week saw its biggest weekly decline so far in 2019.

Over the weekend, US President Donald Trump offered mixed signals regarding his approach to trade negotiations with China. On one hand, he tweeted that talks will continue in a “congenial” manner, with “absolutely no need to rush”. On the other hand, he also said he loves “collecting big tariffs” and told China to “act now”. The tweets came amid reports that US trade negotiators gave their Chinese counterparts a one-month deadline to reach an accord or risk having US tariffs imposed on all Chinese imports.

Markets’ base case on shifting sands?

Given Trump’s unpredictability, attempts to predict the end result of US-China trade talks risk placing any base case on shifting sands. At the time of writing, markets are still waiting for details on China’s “countermeasures” to the higher US tariffs imposed on the $200 billion worth of Chinese goods on May 10. Keep in mind that President Trump has also cited the possibility of a 25 percent on a further $325 billion of Chinese goods that are currently tariff-less. While it appears that some market participants are still holding out for some form of a formalized US-China trade deal, last week’s selloff from risk assets could set markets up for more trade-related volatility ahead.

Potential deviations for US, China economic trajectories may add to market uncertainty

Besides commentary from either government on the trade front, investors will also keep a close eye on major economic indicators out of both the US and China this week. The respective sets of industrial production and retail sales data out of both countries are due Wednesday, set against the backdrop of re-emerging tensions between the world’s two largest economies. The US economic growth momentum is expected to remain steady, while China has been showing signs of stabilizing in recent months; any significant deviation from those trajectories may add another layer of uncertainty to markets.

Safe havens strengthen as Trump tells China to “act now”

While Trump has asked China to “act now”, investors didn’t have to wait for such a call from the US President before taking risk off the table. Gold is now holding around the mid $1,280 while the Japanese Yen is strengthening, with USDJPY falling further below the 110 level. Meanwhile, the Dollar index (DXY) is steadying around the 97.3 level at the time of writing, having wrapped up two straight weeks of declines.

A lack of progress in the US-China trade impasse should create a supportive environment for safe-haven assets, while a major deterioration in tensions could see a major upwards move for the likes of Bullion and JPY.

Asian economies to brace for further global trade slowdown

For the week ahead in Asia, Singapore and Indonesia are set to release their respective external trade figures for April, amid ramped-up trade tensions between the US and China. The higher barriers to trade, coupled with the slowdown in the global economy, have weighed on Asian economies as exports have posted declines since 2018. As markets brace for China’s “countermeasures” to the US tariff hike, along with potentially more US tariffs in the pipeline, trade-dependent Asian countries may have to brace for a further slowdown in exports, while becoming more reliant on domestic consumption to prop up growth momentum.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Offer Uncharacteristic Response to Higher US Tariffs on $200b Worth of Chinese Goods

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It’s official – President Donald Trump has raised the existing 10 percent tariff to 25 percent on $200 billion worth of Chinese goods shipped to the United States, the net result being that there is now a 25 percent tariff imposed on a total of $250 billion worth of Chinese products. After a week-long sell-off in anticipation of new tariffs, there was an uncharacteristic reaction from Asian stock markets to the confirmation.

The Shanghai Composite Index initially pared gains but rebounded to a new intraday high. The Nikkei 225 reversed losses after its lunch break, while many other Asian stocks remain in positive territory. The unexpected price action in Asian equities could be due to optimism that the United States and China can still find a resolution to this long-standing issue with trade talks set to continue on Friday in Washington.

Safe haven assets such as Gold and the Japanese Yen are little changed at the time of writing, instead of surging as one may come to expect following an escalation in trade relations between the two largest economies in the world.

Meanwhile, Brent futures are refusing to take things lying down, and look set to continue testing the $71/bbl level. However, beyond the initial price movements, the escalation of trade tensions between the United States and China could be negative for global GDP momentum, and it would be expected that Oil markets would find themselves under negative pressure from concerns over the global economy in the long-run.

More trade drama ahead?

Investors will try to ascertain next what China’s “necessary countermeasures” will entail exactly, and whether this path will eventually lead to Trump pressing ahead with the 25 percent tariff on a separate $325 billion worth of Chinese goods. Noting that subsequent moves are only expected to ramp up tensions between the US and China, such posturing on both sides begs the question – how much further does this tit-for-tat tariff track go on for?

Judging by 2018 trade figures from the US Census Bureau, about 47% of Chinese imports into the United States currently have tariffs levied on them, while 91% of US goods sent to China are subjected to tariffs.  This indicates that the United States has more mileage to implement tariffs than the other way around.

Should tariffs be imposed on all US-China trade, this will very likely raise the prospect of a global economic downturn and severely dent the year-to-date gains for riskier assets. Keep in mind that, according to calculations by Bloomberg Economics, using OECD data, someone percent of global GDP is exposed to risks stemming from US-China trade risks. Ramped up trade tensions could have broader ramifications beyond the exchange of goods and services between the world’s two largest economies, potentially feeding fears in the global financial markets and impact consumer spending as well, while affecting other countries that are intertwined in the global supply chain.

Can investors still hope for a positive resolution?

The saving grace amid all these trade tensions is that trade talks in Washington are set to continue on Friday, offering markets a silver line of hope that a positive breakthrough may still be on the cards. Until then markets will remain on the edge of their seats, amid scant signs of a much-needed positive headline from these persistent negotiations.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.