The fickle nature of the US-China risk sentiment dominates the week
|The news on Thursday, that China was ready to renegotiate the extent of tariffs boosted risk assets. However, later in that session the US agreed to rollback tariffs too, but faced some fierce internal opposition for doing so. So where are we? As of writing it is unclear. The main takeaway for investors is that risk sentiment is fragile and subject to rapid change. For short term traders this means taking profits when you have them and going with the short term shifts in risk sentiment.
Key events from the past week
China Commerce Ministry: China ready to negotiate, Thursday Nov 7 China's Commerce ministry said that China is ready to negotiate on how much tariffs can be cancelled and that both sides (the US and China) will cancel tariffs at the same time a phase one deal is reached. This boosted risk on sentiment.
Bank of England: Interest rate decision, Thursday Nov 07 The Bank of England kept rates unchanged as expected, but BOE members Saunders and Haskell were dovish dissenters who wanted the BoE to cut rates. The GBP was pressured on their dovish dissent and cable was down to 1.2800 on the release.
RBA: Interest rate statement, Tuesday Nov 05. The RBA said, in a largely unchanged statement, that: "The easing of monetary policy since June is supporting employment and income growth in Australia and a return of inflation to the medium-term target range” The chances of a rate cut were reduced post statement supporting the AUD. See here for the full rate statement.
Key events for the coming week
GBP: Gross Domestic Product, Monday, Nov 11 The BoE announced their concern about slowing global growth in their rate meeting this week. A weak reading here will play into the bearish GBP mood for coming BoE’s rate cuts. There will be no FX trading seminar this Monday as I am travelling to Malaysia
NZD: Interest rate decision , Wednesday, Nov 13 The markets are expecting a 50% chance of a rate cut this month after poor employment data out of New Zealand on Nov 05. The risk here is for another rate cut out of the RBNZ, despite a pickup in global trade fears.
Risk sentiment: US-China trade tensions, ongoing US President Trump and China’s President Xi have delayed signing the Phase one deal, but the mood is still generally optimistic for an eventual signing. Any breakdown in this deal and we can expect risk off tones. (JPY, CHF, and Gold strength)
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