Risk appetite returns on trade hopes

Equity markets embrace latest trade headlines

Asian markets were in risk-on mode today following reports that Huawei’s CFO had been released on bail in Canada, thereby diffusing some of China’s rumblings of discontent. In addition, reports that a proposal to trim tariffs on cars imported from the US to 15% from 40% has been put in front of China’s Cabinet for appraisal over the next few days also helped sentiment.

Pound still vulnerable

GBP/USD could be heading for its first up-day in four days amid better risk appetite after touching the lowest level in 20 months yesterday. However, the Brexit turmoil and the threat of an internal leadership challenge continue to hang over the pound. Should she survive a vote of no confidence, then she would be immune to any challenge for 12 month and the Brexit vote would still be due. Should she lose, that might pave the way for either a no-deal Brexit or an early general election, which would most likely be seen as a second referendum on Brexit. Whichever way, markets will remain nervous and volatile.

GBP/USD Daily Chart

Source: OANDA fxTrade

Aussie unmoved by housing market news

The uptick in risk appetite kept the Aussie bid during the Asian session, allowing the antipodean currency to overcome some disappointing housing data. House prices in Sydney have fallen more than 10% from their peak in 2017 as tighter mortgage lending standards squeeze loan availability and house buyers scale back purchases. Data from the Australian Bureau of Statistics yesterday showed Sydney house prices falling 1.9% in the three months to end-September, the worst performance since 2005. AUD/USD remained firm in the Asian session, testing resistance at the 100-day moving average of 0.7228. The 55-day moving average at 0.7185 has acted as support this week, as it has done since November 1.

AUD/USD Daily Chart

Source: OANDA fxTrade

US consumer prices on tap

Yesterday’s data showed gains in producer prices slowing in November. Will we see the same result from consumer prices? Latest surveys suggest this will be the case, with forecasts of a 2.2% annual gain compared with 2.5% last month while on a monthly basis prices are seen flat.

On the European front, Euro-zone industrial production data for October is expected to rebound from September’s disappointing numbers. Italian PM Conte is due to meet with EU’s Juncker to discuss Italy’s 2019 budget plan. Any positive news would be bullish for the Euro.