Peter A Rosenstreich
Swissquote Bank Ltd
Just when you thought that US President Donald Trump could not mismanage trade policy or his administration any further, we get Huawei's chief financial officer being detained at a Canadian airport on a US extradition request. This come on the heels of sensitive US-China relations and a temporary truce in the so-called trade war in the wake of the G20 dinner discussions in Argentina.
As expected, Beijing is furious, demanding Meng Wanzhou's release and declaring the arrest a human right violation. While Trump claims that he had no knowledge of the impending arrest when he met with China's President Xi Jinping, news has broken that John Bolton, his National Security Advisor, was aware of it. Reuters has indicated that the arrest was connected to an alleged scheme to evade US sanctions again Iran using the global banking system, which some claim is controlled by the US.
Stay on top of the markets with Swissquote’s News & Analysis
Inevitably, market reaction was extremely negative (S&P 500 suffering one of the largest single-day drops of the year) and it was saved only by rumors that the Fed might consider slowing the pace of rate hikes. Hopes that a full deal could be reached in 90 days seem like a pipe dream now. It is unlikely that the public disrespect shown by the US will be forgotten quickly. In addition, mixing business with politics is a dangerous business but one that China is well versed in. With the global growth outlook already weak, expectations for a full-blown US-China trade war will only hurt further. The US yield curve is moving from flat to negative on the short end but the trend is towards a full inverted curve indicating a US recession.
Our prediction for a weaker USD in 2019 will be supported by lower yields in the long term.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Recommended Content
Editors’ Picks
EUR/USD hovers around 1.0700 after German IFO data
EUR/USD stays in a consolidation phase at around 1.0700 in the European session on Wednesday. Upbeat IFO sentiment data from Germany helps the Euro hold its ground as market focus shifts to US Durable Goods Orders data.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold price flat lines above $2,300 mark, looks to US macro data for fresh impetus
Gold price (XAU/USD) struggles to capitalize on the previous day's bounce from over a two-week low – levels just below the $2,300 mark – and oscillates in a narrow range heading into the European session on Wednesday.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.