· The dollar and export-focused currencies found support on Monday as positive signs for the U.S. economy and upbeat headlines on U.S.-China trade talks boosted investor confidence.
The pound climbed, too, on hopes for an imminent Brexit and an end to years of political paralysis.
The dollar added 0.1% on the yen to 108.76 yen and touched its highest level since Nov. 14 against the euro at $1.1012. It sat at 98.278 against a basket of currencies, just below a two-week high.
Sterling rose 0.1% to $1.2847, after British Prime Minister Boris Johnson, whose Conservative Party leads in opinion polls ahead of the Dec. 12 election, promised to bring a deal to leave the European Union to parliament before Christmas.
· EUR/USD is trading above 1.10 as China has made a gesture to the US on Intellectual Property. The German IFO Business Climate is awaited.
From a technical perspective, repeated failures near 100-day SMA reinforce the recent double-top bearish pattern and support prospects for a further near-term depreciating move. A sustained break below the key 1.10 handle will reaffirm the bearish bias and set the stage for a slide towards the 1.0955-50 intermediate support before the pair eventually drops to the 1.0900 round-figure mark.
On the flip side, 1.1055-60 area now seems to act as an immediate resistance, which is closely followed by 100-day SMA, currently near the 1.1085 region, and the 1.1100 handle. Sustained break through the mentioned barriers might now be seen as a key trigger for bullish traders and pave the way for a further near-term appreciating move. The pair then might aim towards testing the 1.1170-80 supply zone (double-top resistance) en-route the 1.1200 round figure mark.
· GBP/USD is trading around 1.2850, up. Recent opinion polls have shown ongoing strength for PM Johnson's Conservatives. The party's manifesto has not rocked the boat.
From a technical perspective, the pair remains well within a short-term descending trend-channel and is currently placed near a key pivotal point marked by 200-period SMA on the 4-hourly chart. Some follow-through selling, leading to a subsequent slide below the 1.2820-15 region, might now turn the pair vulnerable to accelerate the slide further towards challenging the lower end of the mentioned trend-channel, currently near the 1.2740-35 region.
On the flip side, any subsequent recovery move now seems to confront some resistance near the 1.2900 handle and is closely followed by 1.2920-25 supply zone, above which the pair is likely to make a fresh attempt towards conquering the 1.30 handle. The latter also coincides with the trend-channel resistance, which if cleared decisively might prompt some aggressive short-covering move and lift the pair further towards an intermediate resistance near the 1.3045-50 region. The momentum could further get extended towards the 1.3100 mark en-route May monthly swing highs – around the 1.3175 region.
· China’s slowdown is not the key problem for global growth — the trade war is, says chief economist at S&P Ratings
China’s slowing growth rate should not be a worry but an unresolved trade war between the world’s two largest economies should be, Paul Gruenwald, chief economist at S&P Global Ratings, told CNBC on Monday.
“We’ve been arguing for some time that China slowing from a 7-8% back then to a 5.5% is a broadly healthy development,” Gruenwald told CNBC’s “Squawk Box,” adding that China’s labor force is currently “either flat or shrinking,” therefore the GDP per capita growth is still strong.
In fact, the strained trade relationship is putting a greater dent on global growth than the direct impacts of tariffs he argued.
“All the uncertainty around U.S.-China (trade relationship) is putting a damper on investments. You don’t know where the world’s two largest economies are going and what the investment environment is going to be,” he said.
· As the trade war intensifies, many American companies are moving supply chain logistics out of China and into Southeast Asian nations, namely Vietnam and the United States’ southern neighbor, Mexico.
· And if the two sides cannot pen a deal by mid-December, additional U.S. levies on Chinese exports will go into effect.
″(The Dec. 15 round of tariffs) – that one is going to be different because the first couple of rounds were in capital goods. So, the supplier can take a hit or somebody in the supply chain can take a hit, which push prices up a little bit,” he said.
“If it’s consumer goods, and all of a sudden its your iPhone in your pocket that is 15% to 20% more, that hits the consumers directly, that’s got a political element as well,” said Gruenwald.
Overall, the economist said that investors shouldn’t worry about a slowing growth rate for China. The bigger problem to worry about is the uncertainty looming over the U.S.-China trade relationship that has an affect on each of the economies as well as global growth and the issue is unlikely to be resolved any time soon.
· Stephen Roach, senior lecturer at Yale University’s Jackson Institute, said the preliminary trade agreement was a “pretty hollow deal.”
Investors around the world have been eagerly awaiting the signing of the phase one trade deal between the world’s two largest economies.
According to Roach, the deal would be more of a political win than an effective move toward tackling the underlying problems that sparked the trade conflict.
· The close economic and financial ties between the U.S. and China create potentially greater risks for America’s global clout if the two countries separate further.
“We are still in the foothills of a Cold War,” Henry Kissinger, former U.S. Secretary of State, said Thursday at Bloomberg’s New Economy Forum in Beijing.
Rivalry with China has not escalated to the same level the United States had with the Soviet Union, “but we also don’t have forward negotiations to reduce the political conflict,“ Kissinger said.
· China and the United States are ‘very close’ to a phase one trade deal, the Global Times, a tabloid run by the ruling Communist Party’s official People’s Daily, said on Monday, discounting “negative” media reports.
China also remains committed to continuing talks for a phase two or even a phase three deal with the United States, the state-backed Global Times said on its Twitter feed, citing experts close to the Chinese government.
· China said on Monday the United States should stop abusing the concept of national security and abusing Chinese companies after the U.S. designated tech firms Huawei [HWT.UL] and ZTE as national security risks.
Foreign ministry spokesman Geng Shuang made the comments during a daily briefing.
The U.S. Federal Communications Commission (FCC) voted 5-0 on Friday to designate Huawei and ZTE as national security risks, barring their U.S. rural carrier customers from tapping an $8.5 billion government fund to purchase equipment.
· Japanese Prime Minister Shinzo Abe urged China to preserve a free Hong Kong and backed Beijing's "one country, two systems" principle of governing it in a meeting with Chinese Foreign Minister Wang Yi, just as pro-democracy candidates triumphed in an election in the city.
"The prime minister pointed out the importance of a free and open Hong Kong prospering under one country, two systems," Japan's Chief Cabinet Secretary Yoshihide Suga told reporters.
· Oil prices rose on Monday as positive noises from Washington over the weekend rekindled hopes in global markets that the United States and China could soon sign an interim deal to end their bitter trade war.
West Texas Intermediate (WTI) crude CLc1 rose 18 cents, or 0.31% to $57.95 a barrel by 0626 GMT, having ended last week little changed after tracking ups and downs in the trade talks process.
Brent crude futures LCOc1 were at $63.66, up 27 cents or 0.43%, the benchmark having also finished little changed last week.
Reference: Reuters, CNBC, FX Street
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