Market volatility remains elevated, in part because of confusion over comments by Washington officials re-Sino/U.S trade war this week. The supposed de-escalation of trade tension coming out of the G20 seem to be somewhat misleading and has led to aggressive selling of risk assets and the buying of sovereign bonds.
The VIX has jumped back above 25, and the U.S Dollar has come under modest pressure. The U.S 10-year yield has slumped to +2.8%, level not seen since this summer. The 2-year yield has fallen even faster, resulting in benchmark steepening despite a continued inversion at the belly of the curve (2/10’s +13 bps).
Trade tensions between the world’s two largest economies – U.S and China – just got trickier with the arrest of the CFO and daughter of the founder of Huawei, in Canada, at the request of the U.S. The U.S has been probing Huawei over possible violation of sanctions against Iran.
Chances of a no-deal Brexit are slim but uncertainty looms for the pound because the U.K parliament looks unlikely to approve PM Theresa May’s Brexit deal – voting in the U.K Parliament to begin 14:00 ET on Tuesday, Dec 11.
Expect Sterling to continue to trade very nervously.
Bank of England (BoE) on Brexit Scenarios: GBP currency could fall -15% in disruptive and -25% in disorderly Brexit.
On the commodity front, oil prices continue to remain on the soft side, pressured by a further build in U.S inventories this week. Fearing a glut, OPEC is considering supply cuts at this weeks meeting (Dec 6-7).
Russia remains the key, Moscow could contribute a maximum of -150K bpd cut, but the Middle East-dominated OPEC insists Russia cut by -250K-300K bpd.
Yesterday’s +179K increase in the ADP measure of private employment in November supports the theory that the official non-farm payrolls figures due this morning will show a similar 190K+ gain. That would represent a slowdown from October’s reading, but should still be enough to convince the Fed to raise interest rates again later this month.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.