Markets traded up pretty senselessly yesterday after news came out that China is willing to discuss the extent of rolling back tariffs. Specifically, China’s Commerce Ministry said late Thursday that the U.S. and China had agreed to lift the tariffs imposed on one another during their trade conflict in phases; but questions remained over how much ground—if any —the Trump administration had agreed to give. Looking at it more closely China is demanding the US to roll back tariffs simultaneously and proportionally and that on every further round of the trade deal. This sounds quite different, right?

 

Global Bourses Deflate

Nevertheless, optimism that the trade war was finally nearing an end was raised with stock markets recording gains yesterday. Once it became clear that within the WH there was "fierce opposition" to rolling back tariffs, risk-on evaporated and turned back to moderate risk-off moves on Friday morning.

From my point of view, there are a lot of signs of a melt-up/overheating in markets, the fear and greed indicator being at 91 from 100 or the put/call ratio showing almost nobody is hedging against a downside and I cannot help but state that this is very alarming to me. Even if this deal does somehow happen, how is this going to fix the economies miraculously overnight? Germany's data yesterday showed that it is very much already undergoing a technical recession.

 

Forex Preview: GBP Down

The dollar held onto most of its gains versus the yen and Swiss franc on Friday, even after some scepticism over the latest U.S./China developments. Overall the greenback shows decent strength not across the board but vs the European and Oceanic currencies for example. Meanwhile, the EUR: broke lower and presently trading at 1.1050 with the risk of further downside. The GBP also took a hit after a rather dovish BoE meeting during which 2 MPC members actually voted for a rate cut!

 

Oil Prices Slide

Crude oil prices dropped more than 1 per cent on Friday morning amid lingering uncertainty on whether, and when, the United States and China will agree on a long-awaited deal to resolve their bitter trade dispute. The trade war between the world’s two biggest economies has slowed economic growth around the world and prompted an aversion from energies on worries over demand. Oil prices hit resistance again yesterday around the same levels of the 200-day-MA and will continue to be susceptible to the news in the trade war saga.

 

Gold Near $1470, BTC Stuck at 9K

Gold prices steadied on Friday morning, after dropping up to 2% in the previous session, as hopes of headway in the U.S.-China trade deal boosted risk-on sentiment and pushed safe-havens lower. XAU/USD crashed down to its October low which in my view presents a potentially interesting re-entry buying opportunity as prices are set to recover. Meanwhile, BTC remains stuck at the 9k with little downside bias at the moment.


 

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