Hong Kong now a feature in trade negotiations?

Hong Kong Bill passed by Congress

The US Senate and House have both passed the Hong Kong Human Rights and Democracy Bill, so now it heads to the desk of US President Trump to either sign or veto it. Sources suggest that the President will sign it into law, which will no doubt displease the Chinese just when the Phase 1 trade negotiations are reaching an apparent critical stage. China has already said it would retaliate if the law was passed, while Hong Kong has told the US to “stop meddling”. China’s Vice Premier Liu He said today that he was “cautiously optimistic” about reaching the Phase 1 deal, but remains “confused” by US demands.

The notion of further confrontation in the trade talks has given risk appetite a good slap, with indices lower across the board. US indices are down between 0.17% and 0.24%, with the SPX500 index under-performing. The biggest loser is the Japan225 index with a 1.04% decline while Hong Kong shares fell 0.88%, wiping out most of the early week gains which nobody understood. The China50 index is 0.45% lower.

The risk-off trade was apparent across currencies too, with AUD/USD falling 0.08% and AUD/JPY 0.37%. AUD/JPY looks set to close below the 55-day moving average for the first time in a week, and has tested 100-day moving average support at 73.624 today. USD/JPY slid 0.11% as the yen was bought as a safe haven play.

AUD/JPY Daily Chart

Source: OASNDA fxTrade

Singapore GDP revised upwards

The final reading for Singapore’s GDP growth in the third quarter came in at +2.1% q/q and +0.5% y/y. Both were higher than previous estimates, with manufacturing rising 7.6% q/q and services +0.4% q/q. The forecast for GDP growth this year is +0.5% to +1.0% and for next year widens to +0.5% to +2.5%. The export sector is still struggling, with a contraction of between 9.5% to 10% expected in 2019 but a small rebound is seen next year to 0% to +2%.

There was only a minor reaction in USD/SGD, which gained 0.02% to 1.3583 and is looking to post a fourth consecutive daily gain this week. On a weekly basis, this would be the third one in a row. The 23.6% Fibonacci retracement of the decline from October 1 to November 5 is at 1.3634.

USD/SGD Daily Chart

Source: OANDA fxTrade

The data trickle continues

Carrying on the theme of a slow data week, today’s calendar features the minutes of the last ECB meeting and speeches from ECB’s Mersch and De Guindos. Existing home sales will likely be the main attraction for the US session and are expected to grow 1.4% m/m in October, a smart rebound from September’s -2.2%. The November Philadelphia Fed manufacturing survey is seen improving to 7.0 from 5.6 while speeches from Fed’s Mester and Kashkari complete the session.