The markets have been remarkably muted
Gold markets
Not surprising Gold is picking up safe-haven appeal as players hedge possible tails risk from the Trump-Xi meeting.
Market Musings
Markets have been remarkably muted, even by holiday standards as we’re left to mull of the markets forever changing landscape.
The Fed
One o the more hotly contested debates over the past 24 hours or so has revolved around the Fed after MNI reports Citing unnamed “senior” Fed sources, it says the Fed is starting to consider at least a pause to its gradual monetary tightening and could end its cycle of interest rate hikes as early as the spring. On the other hand, December is a lock, and the Fed hasn’t precisely signalled a U-turn on policy. However, the USD is going have periods of discomfort into year-end for no other reason than currency trader will be hypersensitive to misses on US economic data.
Indeed, the dulcet dovish tones from the Fed have taken the edge of the dollar as this debate will continue to pick up steam in the new year and will crescendo as we approach the central bank meeting in March. But I remain in the camp where the Fed hikes will be gradual but not move into restrictive territory over 3 %, suggesting two hikes only in 2019. So, we could see the dollar come under pressure in the weeks and months ahead if this narrative unfolds.
Trump -Xi
The other debate is centring on Trump-Xi where investor sentiment seems to be favouring a hopeful outcome, and perhaps even a practical suggestion to keep the dialogue open would certainly walk back some of the negativity from last weeks APEC muddle. However, even if US tariff war pauses, there’s a not so new battleground emerging, and that will be focused on the tech sector espionage and intellectual property rights giving rise to conflict beyond trade. According to Deutsche Bank ” The US announced a list of 14 technology fields targeted for review These controls will likely ban not only exports but also sharing information with a foreigner and foreign companies on these topics. International scholars and professionals in the US will probably need licenses to participate in projects in the above fields.”
Regardless of the outcome of the Trump -Xi meeting the vast divide between both countries ideologies suggest we’re going to be dealing with trade issues in one form or another for some time to come
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
