Markets: Liquidity set to tighten, volatility set to rise - ANZ

According to analysts at ANZ, for the global markets, the major shift of the past month has been the deterioration in the tone of US-China trade negotiations.

Key Quotes

“Since the last round of talks, when disagreements on the final text of the agreement arose, both sides have hardened their stance, and the likelihood of a resolution has diminished.”

“Added to these concerns is the possibility that some of the recovery we saw in demand for semi-conductors was driven by Chinese companies front-loading purchases. This combination means that the hopes of recovery, which were underpinning market sentiment and liquidity, are looking fragile again.”

“In particular, the recent rise in the liquidity index looks like it could be short-lived and the market will again find itself in a low growth and low liquidity context, where the momentum for both is once again negative. This is an environment where volatility is higher and where cyclical currencies underperform.”

“The policy reaction function will, in our view, be too slow to come to the rescue (via a large scale shift in official liquidity) in the near term. The Chinese response remains targeted, while the US Fed will need to see a substantial and sustained deterioration in financial conditions before it acts, given the strength still evident in the labour market. Within this context, we remain bearish on cyclical currencies.”

“While the outlook for the major currencies has remained largely unchanged, we have drastically cut our forecasts for risk sensitive, cyclical currencies.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: trade war optimism skews the risk to the upside

The EUR/USD pair has rallied to 1.1062 on Friday, its highest since September 20, as risk-on prevailed heading into the weekend. Reports on progress in trade talks between the US and China.


GBP/USD's rally stalls in the open as weekend headlines highlight Brexit deadlock

GBP/USD is a touch softer in the open on Monday, starting off the week in the consolidation of Friday's upside extension to the highest levels since mid-summer. 


USD/JPY consolidating bull rally into 108 handle on US/Sino trade deal optimism

USD/JPY starts out the week flat to Friday's close after markets rallied at the end of the week. Bullish geopolitical undertones in the form of a US/Sino 'phase 1' trade deal help lift USD/JPY onto the 108 handle.


Gold sellers cheer US-China trade optimism against all odds

With the US and China near to end the two-year-old trade tussle, Gold bears give little importance to doubts over soft Brexit and tension surrounding Syria while flashing $1,484.70 as a quote during Monday’s Asian session.

Gold News

US China trade deal propels US markets and yields higher and leaves dollar mixed

The US and China reached a limited trade deal on Friday a first step on the path to what both sides said could be a more comprehensive pact later in the year. President Trump said the countries reached a “very substantial phase one deal”.

Read more