Markets Rise as Traders Remain Hopeful About US-China Trade Talks

Asian markets gained today as traders hoped that the US and China will reach a compromise on trade. On Wednesday, it was reported that the US was seeking fresh high-level negotiations on trade with China. This will be the third attempt to forming a deal. Yesterday, the US president lowered the expectation of a deal, saying that the US was not in a hurry for a deal. On economic data, releases from China showed that industrial production and retail sales rose at a faster rate than traders were expecting. In August, industrial production rose by a YoY rate of 6.1%, which was higher than the expected 6.0% while retail sales rose by a YoY rate of 9.0%. Traders were expecting retail sales to grow by 8.8%.

Meanwhile, Chinese officials will hold a roundtable discussion with major Wall Street officials on how to improve China-US ties. The meeting will take place on Sunday and major officials of Wall Street banks like Goldman Sachs, Citi, Morgan Stanley, and JP Morgan are expected to attend. The meeting will be chaired by Zhou Xiaochuan - the former PBOC chairman - and John Thornton, the former president of Goldman Sachs.

European stocks rose today as traders waited for the outcome of US and EU trade negotiations. Germany’s DAX, EU’s Stoxx, and France’s CAC rose by 0.23%, 0.05%, and 0.25% respectively. Economic data from the EU showed that wages rose at the fastest pace in six years. This was attributed to the increase in social security and other employment costs. In the region, the hourly labour costs rose by an annualized rate of 2.2% in the second quarter. This increase was attributed to a 1.9% increase in wages and salaries and a 2.9% increase in non-wage labour costs. The most affected firms in wage increases were those in the construction industry.

The US dollar fell today after data from the Census bureau showed disappointing retail sales. In August, the retail sales rose by 0.1% which was lower than the 0.4% traders were expecting and the 0.7% reported for July. In total, goods worth $509 billion were purchased in the month. Core retail sales rose by a monthly rate of 0.3%, which was lower than the expected 0.5% The export price index contracted by 0.1% against the expected 0.1% while the import price index declined by 0.6%. This data came a day after the consumer price data that missed analysts’ forecast was released.

GBP/JPY

The GBP/JPY pair started a sharp bull run in mid-August when it reached a YTD low of 139.89. Today, the pair reached an intraday high of 147.05. This was the highest level since August 13. It was also along the 50% Fibonacci Retracement level. It was also above the 14 and 21-day EMA on the four-hour chart. The pair is likely to continue the upward momentum. In the near-term however, it is likely to move slightly lower to the 145.53 level, which is also the 38.2% Fibonacci level.

EUR/CAD

The EUR/CAD cross reached a YTD low of 1.4798 in mid-August. It then started a strong rally that took it to a high of 1.5368 on Monday of this week. It then fell below the important channel as shown in the chart. Today, it is trading at 1.5200, which is also the 61.8% Fibonacci Retracement level. The pair is likely to continue the upward momentum and test the important support of 1.5300.

EUR/USD

Yesterday, the EUR/USD pair moved above the symmetrical triangle pattern it had formed in the past few days. Today, the upward momentum continued. The pair reached the important level of 1.1720 and found resistance. It is now trading at 1.1675, which is lower than today’s intraday high. The pair is likely to resume the upward momentum. If it retraces, it will likely test the important support of 1.1595, which is the 61.8% Fibonacci Retracement level and the apex of the previous triangle.