December 16, 2019

HK tensions hindered trade deal progress

LQDFXperts Weekly Highlights: HK tensions hindered trade deal process

HK tensions weighed on trade deal progress during the Thanksgiving week. Investors are concerned as to the extent of the Chinese response on two US bills supporting Hong Kong protesters.

Trade issues prevailed after Beijing said negotiators had reached a “common understanding on resolving relevant problems”. Further, U.S. President Trump’s comments sparked hopes of an imminent resolution to the prolonged trade war with China.

However, in the end of the week China warned the United States that it would take “firm counter measures” in response to U.S. legislation backing anti-government protesters in Hong Kong. The Senate and House passed the “Hong Kong Human Rights and Democracy Act” last week which President Donald Trump signed into law.

Broadly, currency market volatility held low as major currencies remained trapped in tight ranges.

The US dollar advanced as Jerome Powell, FED Chairman, said that he sees the US economy as “glass more than half full.” Broadly, the U.S. currency gained against its peers from data showing the world’s biggest economy is on a firm footing.

In the UK front, the pound rose on Wednesday after a model for pollsters YouGov said Prime Minister Boris Johnson was on course to win a majority in parliament at the Dec. 12 election.

The EUR/USD enjoyed a quiet week and posted slight losses.

USD/CAD recorded weekly gains for the third time in the past month. The upcoming week features GDP.

The swings continue for GBP/USD. The pair posted gains of close to 1.0% last week. This week features the PMI reports.

The Aussie continues to stumble, as AUD/USD posted losses for a fourth straight week. The pair is now at its lowest level since mid-October.

The Dollar/yen posted considerable gains last week. Investors are keeping an eye on Japanese inflation and retail sales reports.

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LQDFXperts – The week ahead – HK tensions hindered trade deal process

  • On Monday (02.12) US ISM Manufacturing PMI has fallen short of expectations in the past four months, standing at 48.3 in October. Improvement is likely in the report for November. The data point serves as the first hint toward Friday’s jobs report. An increase to 49.4 is on the cards.
  • On Tuesday (03.12) the Reserve Bank of Australia – RBA will kick off the new month with its monetary policy meeting. The Reserve Bank of Australia left the interest rate unchanged at 0.75% in November, after gradually cutting it from 1.50% during the year. Economists forecast that the interest rate will remain unchanged at 0.75%. The RBA meets to set rates again only in February.
  • On Wednesday (04.12) the Australian Bureau of Statistics will release the Australia GDP. The Australian economy expanded by a healthy 0.5% quarterly in both the first and second quarters of 2019. The upcoming publication for the third quarter is forecast to be identical with 0.5%. Further, the Canadian rate decision is expected. The Governor of the Bank of Canada seemed to dismiss speculation of a rate cut. BOC last changed the Overnight Rate back in October 2018 and has been on the sidelines ever since. This time will likely be similar – with the rate remaining at 1.75%.
  • On Thursday (05.12) Australian Trade Balance will be released, as trade balance continues to record trade surpluses. The surplus widened to A$7.18 billion in September, well above the forecast. Analysts expect the trade surplus to widen in October, with a forecast of A$6.50 billion.
  • On Friday (06.12) the U.S. NFP report is due this week. In October, the jobs data came out stronger than expected. Similar results are expected for November with the upside surprise. Economists forecast that non-farm payrolls will rise 183,000 during the month. But wage growth is forecast to remain unchanged while the employment rate is expected to stabilize at 3.6%.

Follow this week’s economic calendar.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, CNBC, FX street

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