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Good, Bad and Ugly: Decisive Week May Set Course for Currencies

By Ritu,

Capital Sands

 

The next week could set the tone for the $6.6 trillion-a-day currency market in 2020.The geopolitical risks that have shaped foreign exchange this year — Brexit and the U.S.-China trade war — are approaching a critical point, according to Credit Agricole SA. The U.K. will vote for a government on Thursday to negotiate the next phase of Brexit, while Washington will impose further tariffs on Beijing on Dec. 15 unless a phase-one deal is reached before then.

It’s also looking busy on the central bank front, with the Federal Reserve, Swiss National Bank and the European Central Bank all set to deliver their latest monetary policy decisions. With the ECB expected to signal a more balanced policy outlook, strategists are betting on the euro to rally in 2020. On the other hand, the Fed may acknowledge the persistence of geopolitical risks, weighing on the dollar.

This year has seen the dollar continue its dominance in global markets by outperforming many of its G-10 peers, flouting calls by major banks for a downtrend in 2019. Meanwhile, the U.K. currency has had a tumultuous ride. The pound fell to an almost three-year low in September before recovering almost 10% after Prime Minister Boris Johnson secured a Brexit deal and called a snap election in the hope of securing a majority and exiting the European Union next month.

The polls into the vote have consistently showed a Conservative majority but investors remain wary of previous polling failures, and the party’s lead has narrowed as the vote draws closer. The market prefers the Conservatives to Jeremy Corbyn’s Labour party, with its pledges to nationalize industries, tax the wealthy and overhaul the economy.

Across the Atlantic, the U.S. President Donald Trump said on Tuesday he was prepared to wait for another year to reach a deal with China.

The uncertainty involved in predicting geopolitics mean “a bad and an ugly outcome are also possible,” according to Credit Agricole. The former would involve a Conservative majority but no U.S.-China trade deal plus fresh tariffs on China, benefiting the pound and funding currencies.

The ugly outcome “would represent the sum of all market fears at present — a hung Parliament in the U.K. and further escalation of the trade war.” In this scenario, the yen, gold and the franc would be the biggest beneficiaries.

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Forex – U.S. dollar Unchanged Ahead of Job Report

By Ritu,

Capital Sands

 

The U.S. dollar was unchanged on Friday in Asia as traders awaited the release of the latest U.S. job report, which is due at 8:30 AM ET (13:30 GMT).

The U.S. dollar index that tracks the greenback against a basket of other currencies was unchanged at 97.380 by 1:30 AM ET (05:30 GMT).

Analysts tracked by Investing.com expect the job report to show the economy added 186,000 jobs in November, up from 128,000 jobs in October and 155,00 jobs in November 2018. The unemployment rate is projected to hold steady at 3.6%, unchanged from October and down slightly from December 2018.

Traders also kept an eye out for the latest development on the Sino-U.S. trade front as U.S. President Donald Trump said “something could happen” on whether the Washington will impose new tariffs on Chinese goods starting Dec. 15.

Trump said on Thursday that negotiations with China are going “very well,” just one day after he said an agreement to end the trade dispute may have to be delayed until after the American presidential election in November 2020.

The USD/CNY pair traded 0.1% lower to 7.0417.

The EUR/USD pair was little changed at 1.1102 as data on Thursday showed that German factory orders unexpectedly declined in October.

The GBP/USD pair was also near flat at 1.3156. Reports this week suggested that U.K. Prime Minister Boris Johnson could win a majority at next week’s election, paving the way for Britain to leave the European Union on Jan. 31.

The USD/JPY pair slipped 0.1% to 108.68.

Meanwhile, the AUD/USD pair and the NZD/USD pair both gained 0.2%.

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Asian Markets Gain Ahead of U.S. Nonfarm Payrolls Data

By Ritu,

Capital Sands

 

Asian markets gained in morning trade on Friday ahead of the release of U.S. nonfarm payrolls data for November due later in the day stateside.

China’s Shanghai Composite was little changed by 10:35 PM ET (02:35 GMT), while the Shenzhen Component inched up 0.2%.

Japan’s Nikkei 225 rose 0.3% after the country’s Prime Minister Shinzo Abe announced on Thursday evening stimulus measures to support growth

The total stimulus package amounts to around 26 trillion yen ($239 billion) spread over the coming years.

The stimulus are expected to boost growth in Japan by about 1.4%, according to a government document.

“We shouldn’t miss this chance, this is exactly when we should accelerate Abenomics and overcome our challenges,” Abe said.

The stimulus came after the Hong Kong government also announced further stimulus measures worth around HK$4 billion ($511 million) earlier this week, as authorities hope to shore up businesses suffering from months of civil unrest.

Hong Kong’s Hang Seng Index last traded at 26,386.75, up 0.7%.

On the Sino-U.S. trade front, the Wall Street Journal reported that the Washington and Beijing disagree on the size of agriculture purchases.

Citing people familiar with the discussions, the Journal said U.S. President Donald Trump wants China to buy $40 billion to $50 billion of farm goods a year, which is significantly higher than the $8.6 billion China bought last year.

South Korea’s KOSPI traded 0.9% higher.

Down under, Australia’s ASX 200 gained 0.3%.

Looking ahead, traders now await the U.S. governments monthly nonfarm payrollsreport, which is expected later in the day.

 

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OPEC and allies prepare to deepen oil output cuts

By Ritu,

Capital Sands

 

OPEC and its allies led by Russia were moving closer on Thursday to agreeing to deeper oil supply cuts next year to support crude prices and prevent a glut, sources from OPEC and its allied producers said.

The Organization of the Petroleum Exporting Countries (OPEC) meets on Thursday in Vienna followed by a meeting with Russia and others, a grouping known as OPEC+, on Friday.

OPEC+ has curbed supply since 2017 to counter booming output from the United States, which has become the world’s biggest producer.

Next year, rising production in the United States and other non-OPEC countries such as Brazil and Norway threaten to add to the glut.

OPEC’s actions in the past have angered U.S. President Donald Trump, who has repeatedly demanded OPEC’s de facto leader Saudi Arabia bring oil prices down if it wants Washington’s to provide Riyadh with military support against arch-rival Iran.

In the past few months Trump has said little about OPEC but that might change later in 2020 if oil and gasoline prices rise – a politically sensitive issue as he seeks re-election in November.

Washington’s ongoing trade dispute with China has also clouded the economic and therefore oil demand outlook for 2020.

Two OPEC+ sources told Reuters on Thursday the group would discuss increasing current cuts of 1.2 million barrels per day by more than 400,000 bpd.

Iraq, OPEC’s second largest producer, said on Tuesday OPEC de facto leader Saudi Arabia was supporting cuts of 1.6 million bpd, or 1.6% of global demand.

The current cuts expire in March and OPEC sources and delegates have said the new deal could be extended to June or until the end of 2020.

Saudi Energy Minister Prince Abdulaziz bin Salman has so far declined to comment on policy matters in Vienna.

Russian Energy Minister Alexander Novak was cited by his ministry as telling Prince Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue.

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Asian currencies fueled by new trade optimism

By Ritu,

Capital Sands

 

Asian currencies made something of a comeback on Thursday morning in Asia as optimism about a possible trade deal between China and the US returned. The USD was lost a little ground and the Australian dollar stopped a multi-day slide even as the Yuan continued to slide.

On Wednesday US President Donald Trump said discussions between China and the US are going very well. Negotiators may be closers to an agreement on tariff relief that could help stave off the next round of US tariffs on Chinese goods that is due to take effect Dec. 15, Bloomberg reported. These tariff relief measures would be part of a phase one deal.

Trump’s comments came just a day after saying he has no deadline for a deal and would not be opposed to waiting until after the elections in November 2020.

The US dollar lost some ground. The US Dollar Index Futures, which tracks the greenback against a basket of currencies, was down 0.09% to 97.56 by 9:00 PM ET (02:00 GMT).

In mainland China, The People’s Bank of China (PBOC) set the reference rate for the yuan, the midpoint around which the currency is allowed to trade, at 7.0521, slightly weaker than the 7.0513 the day before.

The GBP/USD pair was up 0.06% to 1.3112.

The EUR/USD pair was also moving higher and was up 0.07% to 1.1084.

The USD/JPY pair gained in morning trading and was up 0.02% to 108.88.

The AUD/USD pair was near flat, down 0.01% to 0.6848 while the NZD/USD was up 0.34% to 0.6550.

The New Zealand dollar has been gaining ground this week after reports on Monday that the country’s terms of trade, which measures the purchasing power of exports compared to imports, jumped 1.9% in the three months to September.

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Forex – Dollar Near 1-Month Lows as Trade War Fears Ramp Up

By Ritu,

Capital Sands

The U.S. dollar was trading near one-month lows on Wednesday after U.S. President Donald Trump warned a trade deal with China might not come until after the 2020 presidential election and threatened to escalate his trade war with other nations.

The U.S. dollar index against a basket of six major currencies was at 97.6 by 03:47 AM ET, not far from the lows of 97.55 reached on Nov. 18.

Trump’s statement Tuesday that he had “no deadline” for an agreement with China hurt sentiment as global trade frictions have already hit economic growth, with many economies struggling to find their footing.

On Monday, he said he would hit Brazil and Argentina with trade tariffs for “massive devaluation of their currencies”.

If there is no deal or substantial progress in talks before Dec. 15, tariffs on remaining Chinese imports, including cell phones, laptop computers and toys, will take effect, Ross said.

“Expectations for a U.S.-China trade deal are fading, and dollar/yen has broken its support levels, so the bias is tilted to the downside,” said Takuya Kanda, general manager of research at Gaitame.com Research Institute in Tokyo.

“More tariffs would push dollar/yen lower still.”

Market analysts said the dollar could only weaken substantially if U.S. economic data showed a sharp declaration and expectations of rate cuts grew sharply. Money market futures are pointing to a rate cut of one quarter point by next July.

The euro was little changed near one-and-a-half week highs against the dollar at 1.1085.

The biggest beneficiary of the slide in the dollar was the British pound, which climbed 0.5% to a fresh six-month high of 1.3059.

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Gold Prices Up; Trade Deal Might Come After 2020 Election

By Ritu,

Capital Sands

 

Gold prices were supported by a fresh round of uncertainty of the US-China trade deal on Wednesday morning in Asia. The precious metal still hovered near a three-week high above $1,480.

Gold Futures contracts were up 0.06% to trade at $1,485.35 by 11:10 PM ET.

US President Donald Trump suggested that the long-awaited trade deal might have to wait until the 202 election, contrary to what his senior advisor Kellyanne Conway just said this week that the deal could come by the end of the year.

“In some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right; it’s got to be right,” Trump said at the NATO event in London.

The mixed signals from the White House stirred uncertainty of the global economic prospects, supporting gold that is widely seen as a safe-haven asset.

US Commerce Secretary Wilbur Ross also said if no substantial progress was made soon, another round of duties on Chinese imports including cell phones, laptops and toys would take effect on Dec. 15.

 

 

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Gold trades marginally lower, awaiting trade talk cues

By Ritu,

Capital Sands

 

Gold traded marginally lower on Tuesday morning in Asia, hovering around the $1,468 range as the U.S. and China are still in talks for ‘deal or no deal.’

Gold Futures contracts traded at $1,467.95 by 10:00 PM ET, down 0.09%.

Talks of a possible “phase one” deal between the world’s two largest economies dominated the market this morning, weighing on the precious metal that is seen as a safe-haven asset.

The trade deal was still possible by the end of the year and the first phase of the agreement was being put to paper, according to Kellyanne Conway, a senior adviser to U.S. President Donald Trump.

“There’s a better than 50-50 chance we will get a ‘phase one, skinny’ deal, largely because both presidents, Trump and Xi, need this for domestic political reasons,” Stephen Roach, a senior lecturer at Yale University’s Jackson Institute for Global Affairs, told CNBC.

Gold prices edged up earlier this morning on the overnight news that U.S. President Donald Trump renewed steel and aluminum tariffs on Brazil and Argentina. The move reignited fear of global trade disputes and hampered risk appetite.

The prospects of a trade deal remain unclear as well. Trump said on Monday that the signing last week of two pieces of legislation in the US that support protesters in Hong Kong would not make negotiations easier, but that China still wants a deal.

 

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Oil jumps on Chinese factory growth, hopes for deeper OPEC cuts

By Ritu,

Capital Sands

 

Oil prices rose more than 1% on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.

Brent crude futures rose 74 cents, or 1.2%, to $61.23 a barrel by 0157 GMT. West Texas Intermediate (WTI) futures rose $86 or 1.6%, to $56.03 a barrel, having risen by more than $1 earlier.

On Friday, WTI futures settled 5.1% lower amid reduced volumes because of last week’s Thanksgiving Day holiday while Brent plunged 4.4%. Prices fell on concerns that talks to end the trade war between the United States and China, the world’s two biggest oil users, would be disrupted by U.S. support for protesters in Hong Kong.

But oil rose on Monday after factory activity in November in China, the world’s biggest oil importer, increased for the first time in seven months because of rising domestic demand amid government stimulus measures.

“At the open prices remain supported by the surprising resilient China factory activity with the forward-looking PMI’s beating expectations,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Prices were also supported after Iraq’s oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are expected to at least extend existing output cuts to June 2020 when they meet this week.

The OPEC+ group has coordinated output for three years to balance the market and support prices. Their current deal to cut supply by 1.2 million bpd that started from January expires at the end of March 2020.

OPEC’s ministers will meet in Vienna on Dec. 5 and the wider OPEC+ group will meet on Dec. 6 to make a decision on the current agreement.

“All eyes are on OPEC this week,”

Oil rose in November partly on expectations of the United States and China reaching an initial deal trade deal by the end of the year that would help restore global economic growth and future crude demand

 

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USD/CHF Technical Analysis: Sellers focused on spinning top near multi-week high

By Ritu,

Capital Sands

  • USD/CHF declines after registering a bearish candlestick formation the previous day.
  • Buyers look for sustained trading beyond 1.0000 psychological magnet.
  • 200-day SMA can please sellers during further downside.

USD/CHF drops to 0.9985 during the early trading session on Friday. That said, the pair formed a bearish “Spinning Top” candlestick formation while taking a U-turn from 1.0000 round-figure.

Considering the pair’s repeated failures to provide a sustained run-up beyond 1.0000, coupled with bearish candlestick pattern, prices are likely declining towards the 200-day Simple Moving Average (SMA) level of 0.9950. Though, late-October high close to 0.9970 can offer an intermediate halt during the declines.

In a case where bears dominate below 200-day SMA, mid-November tops close to 0.9910 can return to the chart.

Alternatively, the pair’s successful rise beyond 1.0000 could target October high around 1.0030 whereas late-May peak close of 1.0100 might lure bulls afterward.