09/ 05/ 2019

Market Remains Cautious Prior to US-China Trade Talks

Sterling suffers steep selling yesterday after the UK Government conceded that there will be no Brexit compromise with opposition Labour any time soon. Thus, UK is prepared to participate in European election on May 23. Yen was the strongest one for yesterday, but it’s really a tie with Euro and Swiss Franc. Risk aversion clearly dominates the markets on concerns over China trade war. Trump’s latest tweet indicates that he’s not going to back down with China and hailed that he’d be happy with over USD 100B a year in tariffs.

Markets were nervously awaiting the start of two-day trade talks in Washington later in the global day to see if Chinese negotiators can convince the White House to back down on a threatened tariff hike on Friday. This week, expectations that the United States and China would reach an agreement soon to end their trade war have been upended, sending investors fleeing from riskier assets.

Investors believe the markets reacted vaguely to mid & low-tier reports and all buy-off moved into safe government bonds. 

Looking ahead, economic data will likely take a backseat once more, with the U.S and China set to resume trade talks today. Updates from talks will drive the markets today and UK GDP & US Consumer Price Index will be released on Friday.

08/ 05/ 2019

Mario Draghi takes Centre Stage while growing Fears on Trade Conflicts boost Safe Haven Currencies

Yen remains the strongest since yesterday, extending this week’s rally on risk aversion. Following steep decline in the US, Asian markets open broadly lower and stay pressured. Threat of full-blown trade war continues to weigh on investors’ sentiments. This kicked off after the Trade Tariff comments was tweeted by Donald Trump last Sunday.  New round of tariffs on Chinese imports is ready to be imposed during Chinese Vice Premier Liu’s visit to Washington on May 9th and some investors have seen Trump’s threat as a negotiating tactic.It’s unsure how Liu could turn around the situation after China reneged on its own commitments in the negotiations.

Looking ahead, earlier this morning, trade data out of China provided some early support in certain areas like imports & exports but failed to strike a balance on trade. With no material stats due out of the U.S later in the day, the focus will remain on the U.S – China trade talks. Talks are due to resume tomorrow and we can expect the markets to be in for a choppy day ahead. Any hint of China pulling out and expect panic stations. There could also be some more posturing from the Oval Office later today. Later on the day we have ECB President Draghi is due to speak later today. Any policy talk will be of interest.

07/ 05/ 2019

The Greenback has Fallen Amid US-Sino Trade Tensions

The euro edged higher against the U.S. dollar on Monday, as renewed escalation in the Sino-U.S trade war and high volatility in global equities weighed on dollar. On the other hand, sterling slipped lower against the dollar after opposition Labor Party accused Prime Minister Theresa May of leaking details of the compromise under discussion and jeopardizing talks. May on Sunday stepped up calls for Labor Party leader Jeremy Corbyn to agree a cross-party deal to leave the European Union, following poor results for both parties in local elections last week.

All yesterday’s reports came out positive in favor of the euro common currency.

Focus have been shifted back to politics and Sino-U.S Trade Arrangements. The majors were in recovery mode at the expense of the Greenback, though it will all boil down to whether trade talks will go ahead.

05/ 05/ 2019

Week Ahead | Sterling Stole the Show against Dollar while Focus Turns to US Job Data & UK GDP

Sterling surged on Friday after the leader of Britain’s opposition party said parliament must break the deadlock over Brexit and “get a deal done” to exit the European Union. It also rallied to a one-month high against the euro as broad dollar weakness prompted investors to cut short positions heading into a long weekend with Britain shut for a local holiday on Monday. On the other hand, the dollar slipped against a basket of currencies as traders focused on the weaker aspects in the April U.S. payrolls report, brushing aside stronger-than-forecast hiring and a drop in the jobless rate to the lowest in more than 49 years. Further statements from other Federal Reserve members signaled that there is conflicts of interest rate decisions foreseeing the dollar weakness. Reuters poll released recently state the dollar strength could last for another 3-4 Months and then there could be a gradual decline in strength.

Markets rocked with the Fed, the BOE, and Non-Farm Payrolls in a robust kick-off to the month of May. The action continues in the upcoming week with US inflation, UK GDP, and two rate decisions in the South Pacific among other events.